For Italian companies that intend to export to India, what is the impact of the recent elections that saw the re-election of PM Narendra Modi? Although the Bharatiya Janata Party (BJP) gained only 240 seats, below the absolute majority of 272 seats, the BJP-led National Democratic Alliance (NDA) coalition achieved a total of 292 seats. This allowed Modi to secure a third term, although he will now have to govern in coalition with other parties that will have greater influence on policy decisions.
La re-election of Modi comes at a crucial time for India, which needs to continue with massive investments in infrastructure and strategic sectors. The policies of the new coalition government could influence the decisions of private and foreign investors, who will need to consider the government's new priorities and direction.
Despite a more complex political environment, it is expected that the BJP will continue to promote policies conducive to long-term economic growth and investment. This is in line with India's goal of becoming the third world economy in the coming years. For Italian companies, this represents an opportunity to access an expanding market, with an awareness of the need to understand and adapt to local political and economic dynamics.
Although the recent elections introduced a degree of uncertainty in the markets, Narendra Modi's leadership suggests that India will continue on its path of economic development, maintaining solid long-term investment prospects.
The speed with which the country is evolving and the need to diversify supply chains make it a very attractive destination for foreign investment, which is expected to flow into various sectors in the medium term.
India's trade relations with the European Union have recorded. an increase in 30% in the exchange of goods over the past decade. Currently, the EU is the nation's 10th largest trading partner, making it the second largest destination market for European exports, after the United States. In the services sector, the value of trade reached 30 billion euros in 2020. In addition, the EU is the largest foreign investor in India, with foreign direct investment (FDI) amounting to about 60 billion euros. Although challenges remain, such as non-tariff barriers imposed by the EU that create concerns in India's agricultural and industrial sectors, there is a clear political commitment to strengthen economic cooperation between India and the EU.
The establishment of the Trade and Technology Council (TTC) in May 2023 is a concrete example, with a focus on strategic technologies, renewable energy, and resilient trade.
India is the fastest growing economy among the world's top 20 nations, in a year when New Delhi assumed the G20 presidency. In the second quarter of 2023, it recorded a growth of 7.8%. Even the most conservative forecasts indicate that this pace of growth will continue in the coming years, making it increasingly profitable to export to India.
The country is expected to contribute 12.9% to global growth over the next five years, surpassing the United States, which stands at 11.3%. This year, India's GDP surpassed that of the United Kingdom, and it is estimated that by 2030 it will also surpass that of Germany and Japan, ranking third among the world's largest economies, just behind the United States and China.
In early 2023, the nation reached another significant milestone: with 1.4 billion people, has surpassed China becoming the most populous country in the world. In addition, the young average age of its population is becoming a powerful driver of innovation and development.
This population growth is fueling a rapidly expanding consumer market, which is attractive to many Italian companies wishing to sell in India.
The re-election of PM Narendra Modi is not expected to adversely affect exports, but rather provide favorable stability for foreign investment, confirming current opportunities. India is making significant progress in modernizing a historically complex and outdated bureaucracy, facilitating the’opening of new companies.
These efforts have further strengthened Italy-India economic relations, which are strong and focused on five key sectors identified in the 2020-2024 Action Plan, adopted during the Virtual Summit between former Italian Prime Minister Giuseppe Conte and Indian Prime Minister Narendra Modi in November 2020: green economy, agribusiness, infrastructure, digital, and manufacturing/lifestyle.
In 2023, Italian exports to India recorded a 7.6% growth, exceeding 5.1 billion euros, confirming the positive trend of exports of products made in Italy to this country, which is considered a strategic partner for Italy. Machinery and equipment represent the main item of Italian exports, with a share of about 39.9%, followed by chemicals, base metals and electronic equipment.
The technology transfer offers an additional opportunity for companies interested in exporting to India, considering the nation's growing interest in technology and innovation.
Octagona, an expert in business internationalization strategies, can offer key support in this regard. We strive to design customized entry plans and assist in obtaining specific certifications, such as the BIS certification.
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