Last month, India’s population surpassed that of mainland China, making it the world’s most populous country, according to United Nations estimates.
As China’s economy matures and undergoes economic transformation, India – with its fast-growing economy, population of 1.42 billion and well connected diaspora – has set its sights on becoming the next manufacturing hub and global export market for ÎÚÑ»´«Ã½ businesses.
“This population growth is likely going to also translate into an economic growth for the country. And it is important for ÎÚÑ»´«Ã½ to be able to capitalize on it,” said Sreyoshi Dey, program manager at the Asia Pacific Foundation with a focus on South Asia.
“Its expanding middle class means that there will be increased consumer spending and rising investments, particularly in the sector of digitalization, infrastructure, manufacturing, energy and clean tech.”
Although India has yet to integrate itself into global supply chains like China, it has a growing economy that’s attractive for ÎÚÑ»´«Ã½ businesses in the long term, according to Werner Antweiler, an international trade professor at the University of British Columbia.
“India is still a growing market and China is a more mature market in some ways now because of the way the industry has developed. It will lead to some realignments in the long future,” said Antweiler.
“We will see that a lot of attention for Canadian exporters will be focused on India, for the simple reason that it’s a market that they can still take a long position on.”
The ÎÚÑ»´«Ã½ government has taken note of India’s growth.
In ÎÚÑ»´«Ã½’s recently released Trade Diversification Strategy, India is listed as an emerging market where the province will focus on “amplifying and enhancing trade relationships and fostering growth for ÎÚÑ»´«Ã½ products, services and investment opportunities.”
“The Indo-Pacific area is the next area. When we talk about the new top priority when it comes to diversifying our [trade] plan, India is one of them,” Jagrup Brar, ÎÚÑ»´«Ã½ minister of state for trade, told BIV.
Brar said the province will support the federal government’s Indo-Pacific Strategy, released last year, to strengthen the relationship with the region, but that no trade mission to India has been planned yet. Priority was given to the U.S. and other parts of Asia this year.
“We will be going to India, I won’t say in the near future but India will be one of the places [where] we will take a mission in the future,” he said.
Despite growing intentions and efforts on both sides to unlock India’s resource and marketing potential, a meaningful breakthrough in the ÎÚÑ»´«Ã½-India trade relationship will take time to realize, said Dey.
“Most of these strategies are still in the process of being formalized or realized. I don’t think there is going to be a very big change right away,” said Dey, adding that the level of engagement between ÎÚÑ»´«Ã½ and India has been steady.
“And it’s a shame because given the large size for India, you would expect that it would have already explored and expanded the diaspora connections, but that hasn’t happened. So probably that’s a space to focus on building those engagement strategies.”
Realizing a more open market
India has a significant presence in ÎÚÑ»´«Ã½ as one of the largest source countries for immigrants and international students. One in five recent immigrants to the province were born in India, and 60 per cent of the new international students approved to come to ÎÚÑ»´«Ã½ in 2022 were from the country.
However, its dominant position in people-to-people connections did not fully translate into trade activity – ÎÚÑ»´«Ã½-to-India exports were recorded at $1.5 billion in 2022, a recovery to its pre-pandemic level. This positions India as ÎÚÑ»´«Ã½’s fifth-biggest export market, but it only accounts for 2.4 per cent of total ÎÚÑ»´«Ã½ exports.
Historic foreign investment protections by the Indian government have held the country back from growing international trade with ÎÚÑ»´«Ã½ at a higher pace, and have made it a challenging market for exporters to enter, according to a 2022 Asia Pacific Foundation report.
“Over the years, ÎÚÑ»´«Ã½ has captured only a relatively small slice of India’s rapidly growing market. Historically, India protected its domestic sectors and refrained from forging FTAs (free trade agreements) with developed countries,” the report said.
ÎÚÑ»´«Ã½ and India launched negotiations for a Comprehensive Economic Partnership Agreement (CEPA) back in 2010, before abandoning the process in 2017.
However, that is now changing. India started to negotiate and sign FTAs “at a rapid pace” in 2022 with Australia, the U.K., the U.S. and the European Union, according to the report.
ÎÚÑ»´«Ã½ and India also formally resumed trade talks last year on an Early Progress Trade Agreement (EPTA), an agreement to bring both parties one step closer to a much-awaited CEPA, which is part of ÎÚÑ»´«Ã½’s Indo-Pacific Strategy.
Shri Manish, Indian consul general of Vancouver, told BIV that six rounds of negotiations have taken place for EPTA, which he hopes both sides will finalize and announce before the G20 summit in Delhi in September.
“The policy in India is making India for the world,” said Manish.
“We are promoting India as a welcoming destination for Canadian companies who want to expand and encourage them to look into the opportunities in the India market.”
Policy reforms by the current Indian government include its Make in India program that shifts focus from the service industry to the manufacturing sector, and aims to attract investments in that area, according to Manish.
“Post-pandemic, our focus is to educate and do advocacy among Canadian companies to look at India as an alternative market to countries like China,” he added.
Some ÎÚÑ»´«Ã½ and global businesses have seen the opportunity. In 2021, Lululemon Athletica Inc. (Nasdaq:LULU) set up its first technology hub outside of North America in Bengaluru, which is considered the Silicon Valley of India. Tim Hortons has also launched six stores in India since 2022 and wants 120 stores by 2026. Last month, Apple Inc. (Nasdaq:APPL) opened its first store in India.
“Right now, the Indian government is really opening up to investment and opportunities, so this is the best time to start investing time efforts and engagement processes and to engage with the country. India even five years ago was very different from the India right now,” said Dey.
Opportunities for ÎÚÑ»´«Ã½ businesses
Dey said India’s booming English-speaking population – which includes 65 per cent of those under 35 – makes it a competitive destination for labour-intensive product makers, and also creates a potential market for ÎÚÑ»´«Ã½ businesses.
“The booming population means increased pressure on available resources, including education, healthcare, infrastructure, sustainable living, transportation solutions, clean tech, employment … these are areas where British Columbia can step in with innovative solutions and partnerships to build off of,” she said.
ÎÚÑ»´«Ã½ exports to India are concentrated in coal, which accounted for more than 78 per cent of total India-bound exports last year. Manish said India’s demand for good quality coal as well as wood products will keep growing due to high infrastructure growth in the country.
“But there are also opportunities for ÎÚÑ»´«Ã½ companies to find partners and provide their technology for clean energy. We have a new hydrogen policy and it’s a big opportunity for ÎÚÑ»´«Ã½ companies to work in the hydrogen-related industry in India,” said Manish.
“You have technology, we have the market and the manufacturing capacity where we can bring down the prices.”
Manish added that with mining technology and equipment, filming and animation and IT services, ÎÚÑ»´«Ã½ is well suited for some of the areas that are in demand in India, a country that has a growing digital economy and startup ecosystem. India is currently home to 105 unicorn companies whose collective valuation is about $350 billion.
With a huge agriculture industry in India, there are also opportunities in agri-tech and food processing for ÎÚÑ»´«Ã½ firms, according to Brar.
Dey said she hopes to see more engagement by the government and industries in ÎÚÑ»´«Ã½ and India.
“You need to be more physically present in these economies, establish your presence there, meet with the people, engage in activities like a mission in a sector you are interested in, and not just stick within a bubble,” she said.
“If it’s not happening, then ask your local government if that’s a possibility, because these are the spaces that we really need to be able to capitalize.”
Editor's note: This article has been updated to state that six rounds of negotiations have taken place between ÎÚÑ»´«Ã½ and India regarding the EPTA. The piece previously stated that these talks pertained to CEPA. We regret the error.
