Is India the next China adventure?

Now, why would you be interested in the outcome of the Indian election? In fact, the election is relevant not only for the Danish economy, but also for the Danish population in general. As the world’s most populous nation and with a prosperous growth economy, India constitutes a huge and rapidly changing market. 

As emphasised by Stine Haakonson, Associate Professor at the Department of Organization at CBS, it is important for Denmark to establish global alliances and international collaborations, not least in terms of the green transition, which is one of the pivotal points for the partnership agreement between Denmark and India.

We have asked Stine Haakonson five questions concerning the important conclusions a Danish company may draw from the Indian election. 

1.    What has marked the Indian election campaign? And has anything changed from previous years? 

Much like any other country, India is trying to strike a balance between openness and protectionism. This has been a topic during the election. And social inequality has also been an important theme. Modi is a strong advocate for and very dedicated to the largest religion in India, Hinduism. This means that the Muslim population has become rather marginalised just as the less privileged castes. Overall, it would be fair to say that India is much more affected by historical institutions than many other countries. 

2. Where does the election leave India? 

Parts of India have very quickly become part of the global elite, while others have not

- Stine Haakonsson, Associate Professor

In many ways, nothing has changed in terms of India’s position. Even though Modi rather surprisingly failed to secure a parliamentary majority, he managed to get enough allies to keep him in power. So, he will continue as prime minister, although with a somewhat weaker mandate than during the last election period. This means stability both financially and socially. The economy is an area where India is currently experiencing great progress but also great inequality. Parts of India have very quickly become part of the global elite, while others have not. 

3. What will the election results mean for Danish companies operating in India? And in Denmark?

I don’t think that Danish companies in India will experience any serious consequences. In terms of green technologies, IT and biotech, Danish businesses still have plenty of opportunities. 

There has been quite a lot of talk about India as “the next China adventure”, while realistically, the development has been slower than anticipated. This is probably down to inequality within the country as well as the historical conditions businesses operate within. It is also due to the fact that productivity in India is lower, and that India imports quite a few components from other countries, whereas China has most of the components in the production chains. National politics in India are more of a challenge for foreign companies. However, this is also true for other markets, where industrial policies are now on the agenda. 

4. What makes India attractive to European companies?

India has a huge market potential. The country has an ambitious green agenda and there are many highly educated people – engineers in particular. So, there is definitely something worth pursuing. India also holds positions of strength in terms of research on development, however, still not on a par with China. In connection with a number of companies’ China+1 strategies in Asia, India may prove a place worth investing in to minimise risks and enhance resistance along the value chains. In other words, India is relevant both in terms of production and market. 

5. Which role will India play in the future of world trade? 

India holds a strong position in the alliance of the BRICS countries, which together or individually challenge the world order that was prevalent in globalisation until recently. These countries will play a substantial economic role in the future. 

Contact:

Associate Professor Stine Haakonsson: stha.ioa@cbs.dk

Student Assistant Anders Nørland: an.slk@cbs.dk