※Translated with Notion AI. (Plus version)

 

With rising interest in India, more banks and securities firms are pitching investment opportunities.

 

However, concerns about political risks, legal frameworks, talent capabilities, and risks unique to India—unlike Western countries—are often voiced to our editorial team at Selen.

 

Simply accepting sales pitches without a solid understanding of these issues can be dangerous.

 

At the same time, there’s no denying the potential India holds for growth.

 

Having spent over 20 years at the Asian branches of major Western investment banks, handling countless deals,

I’ve gained a deep understanding of India’s unique risks and opportunities that financial professionals in Japan often overlook.

 

But before diving into these insights,

 

I want to start with the basics, ensuring you won’t be misled by uninformed salespeople.

 

The 5 Enticing Aspects of Investing in India

Whenever you’re invited to invest in India, you’ll hear about these five key attractions:

1 Expected Economic Growth

India’s GDP is projected to grow at an average rate of 6.5%, and according to the IMF, it could become the third-largest economy by 2028.

 

 

2 Expanding Domestic Demand

With over 1.4 billion people, India’s domestic demand is expected to increase steadily in the coming years.

 

 

3 Abundant Youth Population

 

About 68% of India’s population is of working age (15–64), with a significant proportion in their 20s and 30s, driving growth.

 

4 Push for Infrastructure Investment

The Indian government is aggressively investing in infrastructure to lay the foundation for economic development.

 

 

5 The Rise of the ‘China Plus One’ Strategy

As tensions between the U.S. and China continue, India is becoming an attractive alternative investment destination for U.S. companies.

 

 

While these factors are indeed real, merely taking the data at face value isn’t enough.

 

We need to dig deeper and understand the history and context behind these numbers to get a more comprehensive view of India.

Why Did India Fall Behind China?

In the 1990s, India and China started from similar economic positions.

 

 

However, China created special economic zones and welcomed foreign investment through liberalization policies, leading to a massive export boom and a central role in the global economy.

 

 

In contrast, India lacked such zones and export-supporting industries during this period.

Distrust of foreign businesses, rooted in its colonial history, and the dominance of domestic conglomerates and state-run enterprises hindered economic reforms.

 

Despite this, India now holds the potential for significant economic transformation, supported by growing political stability.

India: The World’s Most Populous Nation?

 

Accurate population figures for both China and India remain elusive. China’s “one-child policy” has led to underreporting of births, raising doubts about the reliability of its population statistics.

 

With India’s fertility rate at 2.07 and China’s at 1.45, it’s widely believed that India has now overtaken China as the world’s most populous nation.

 

India’s IT Workforce: Among the World’s Best

In the 1990s, the rise of Windows 95 led to a surge in PC use in the U.S., and Indian IT professionals, prized for their mathematical prowess and low wages, quickly became indispensable.

 

They outperformed their Chinese and Korean counterparts in Silicon Valley, helping India establish itself as a global IT powerhouse.

 

Today, India’s IT industry is so advanced that nearly all IT-related work, from consulting to software development, can be handled domestically.

Prime Minister Modi’s Reforms and the Push for Digital Transformation

 

Prime Minister Narendra Modi has implemented reforms aimed at reducing bureaucratic interference and promoting private-sector-led growth, similar to Japan’s postal privatization.

 

But India’s urgent need lies in developing its infrastructure—roads, railways, ports, power, and sanitation. A startling 30% of primary schools still lack toilets, and addressing these issues directly impacts productivity and foreign investment.

 

The push for digital transformation (DX) has further accelerated infrastructure development, bringing India closer to its growth potential.

India’s Diplomatic Strategy: Strategic Autonomy

 

Modi emphasizes India’s “strategic autonomy” on the global stage, enhancing the nation’s presence in international diplomacy.

 

India’s role as a mediator at the G20 showcases its ability to navigate complex international tensions and foster multilateral cooperation.

 

 

As India continues to grow, it will remain a focal point for global attention.

 

This time, we’ve highlighted India’s bright prospects.

Next time, we’ll delve into the challenges and risks India faces.