After soaring for several years, India’s stock market has been on a downturn since November last year. But the longer term outlook for this South Asian giant is still positive, Jim Walker, Founder and Chief Economist of Asianomics Group, told members at the Chamber’s India Rising roundtable on 27 June.  

Walker said all emerging markets have been struggling this year, but there are several factors specific to India that have been spooking the markets: demonetisation, the introduction of a Goods and Services Tax, bad debts in the banking sector, and uncertainty over upcoming elections.

So why the optimism? Firstly, the current issues are all short-term, Walker explained. The second factor is the country’s population.

“India’s demographics are fantastically positive,” he said.

While many North and East Asian economies are facing an ageing crisis, India has a huge young population. Companies looking for new markets to expand into should be paying attention. Leading the way are Japanese businesses, which are “crazily enthusiastic about India,” he said. 

Another useful insight from Walker for prospective investors was the fact that the country’s ratings companies are a good source of up-to-date information. These agencies are huge in India and “give a better picture of what is happening than any other organizations.”

He suggested that the next 12 months or so may continue to be rocky for the country’s stock markets, but over the next 5 or 10 years, India will be a “very interesting place to put your money.”

After Walker’s broad overview, Bryan Kam gave an insight into the reality of doing business on the ground. He is the CEO of BFM International, an e-commerce platform selling products direct to India, and he shares Walker’s positive outlook.

“India is not the largest e-commerce market, but it has the most potential,” he said.

This is due to a number of factors, he explained. Firstly, after the United States and Mainland China, India is already the third biggest export market for Hong Kong. Its young population has helped to make India the world’s second largest smartphone market.

And – perhaps because India did not go through the stage of mass use of PCs and laptops – its consumers are particularly comfortable with online mobile shopping. In fact, in terms of percentage of e-commerce transactions carried out on a mobile phone, India is the world leader with 41%, Kam said. Mainland China, by comparison, is at 33%. 

Another encouraging sign is the recent entrance of global players into the market.

“Big companies are spending big dollars to expand e-commerce in India,” he said, such as Walmart, Amazon and Alibaba.

But there are also plenty of challenges. Shipping products to the country has long been a “very complicated process,” Kam said, with a range of different tariffs and different processes. However, reforms are already under way to simplify procedures.

Cross-border payments are another issue, he explained, and are particularly difficult for business that do not have a local partner. BFM has partnered with DTDC, an Indian courier service, to deliver in India.

During the Q&A session, Walker discussed the relatively low trade flow between Mainland China and India, and the historical mistrust between the two countries. India, for example, is not part of the Belt and Road Initiative.

However, Consul General of India Puneet Agrawal, who attended the event, noted that there had been informal discussions recently between President Xi Jinping and Prime Minister Narendra Modi. He added that Hong Kong’s close links to the Mainland combined with its global reach mean that it can serve as a bridge between the two markets. 

“A lot of people in Hong Kong understand India and China,” he said, “so Hong Kong can perform the role of connector to bring Chinese and Indian people together.”