Other BriefingsIsrael Investment in India
By Andrea Bottega
Israeli investment in India is moving beyond traditional sectors like defense, and is tapping into India’s digital revolution.
Israeli investments in technology have typically favored Western nations where cultural barriers and price sensitivity play a diminished role. However, India’s burgeoning startup ecosystem and push for innovation is attracting Israeli tech companies who see potential in India’s rapid digitization.
These companies know that investing in India does not only mean access to a new, dynamic market, but also access to new sources of funding.
Digital India offers new market access, funding opportunities
In January 2016, India crossed the one billion mark for mobile phone users. In June 2017, the number of data users in India leaped to 450 million; approximately four million additional Indians become data users each month.
Government initiatives such as Digital India and the 2016 demonetization of high currency notes have simultaneously encouraged and forced Indians into the digital sphere. Improving digital connectivity is, in effect, outpacing the construction of roads. Consequently, many Indians now rely on their smartphones to compensate for inadequate public services, such as paying utility bills, banking, and ordering products.
Tech companies – both domestic and international – realize the brewing potential of participating in this unparalleled digital growth. Google, for example, recently rolled out new applications tailored explicitly for Indian smartphone users with low-RAM phones and relatively smaller data plans.
As an increasing number of Indians spend more time online and have better access to the internet, those traditionally ‘offline’ sectors will open up to technological innovation and digital servicing.
Meanwhile, India boasts of a thriving startup ecosystem with talent and backend resources readily available from the country’s information technology (IT) sector. Foreign firms understand that partnering with established domestic startups means profiting from existing networks and market experience.
Here, Israeli companies can leverage their expertise in areas of both technological innovation and traditionally offline sectors, such as healthcare, pharmaceuticals, agriculture, and resource management. By participating in these formative years of Digital India, Israeli investors will position themselves for long term growth in India’s digital boom.
Localizing Israeli products for the Indian market
Despite recent enthusiasm about the growing trade and investment between Israel and India, any real market potential is yet to be achieved. Only an approximate 300 Israeli companies are currently active in India. Between April 2000 and March 2017, cumulative foreign direct investment (FDI) from Israel to India reached US$122 million.
Israeli investors largely look to Europe and North America when doing business abroad; additionally they are often unprepared to deal with the price sensitivity in India’s market and its contrasting business culture.
However, what India lacks in pricing capacity, it makes up for in sheer scale.
Adapting to this market will give Israeli investors access to one of the world’s rapidly expanding markets. Further, it will also prepare Israeli-based companies to do more business in emerging markets across Asia and Africa. In this scenario, India will serve as a testing ground for newly adapted Israeli products and services – positioning Israel to capture market potential in emerging economies with similar characteristics as India.
The lure of Indian investors
For a price sensitive country, India has a surprising number of high net worth individuals. From 2010 to 2017, on average, India added a new billionaire every month. The very richest in India, however, are only part of the growing ecosystem of domestic capital being invested both in and out of India.
Reliance, one of India’s biggest conglomerates, has already invested in a technology incubator in Jerusalem through the Israeli crowdfunding platform OurCrowd. In July 2017, OurCrowd signed a deal with LetsVenture – an India based crowdfunding platform for startups – to provide mutual access for funding in both countries.
Israeli investors active in India or working with Indian partners will gain up access to new sources of funding – for both their domestic and international operations.
Diplomatic ties boost business opportunities
In July 2017, India’s Prime Minister Narendra Modi arrived in Tel Aviv on his first diplomatic visit to Israel. In fact, it was the first time an Indian prime minister has ever visited the country since establishing diplomatic ties in 1992.
With Israeli Prime Minister Netanyahu’s first India visit scheduled for early 2018, both leaders are actively working to improve diplomatic relations. Indeed, new bilateral agreements in tourism, education, and cultural exchange have increased awareness and focused attention on the untapped potential of improved business relations between India and Israel.
As India continues to invest in its digital infrastructure and connectivity, Israeli tech companies can leverage their expertise and innovation in reaching more services and products to the online Indian.
Finally, the experience of localizing products and services for the Indian market will prepare Israel-based companies for growth in other emerging markets – equipping Israel to participate in the digital revolutions of the developing world.
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India Briefing is published by Asia Briefing, a subsidiary of Dezan Shira & Associates. We produce material for foreign investors throughout Eurasia, including ASEAN, China, Indonesia, Russia, the Silk Road, & Vietnam. For editorial matters please contact us here and for a complimentary subscription to our products, please click here.
Dezan Shira & Associates provide business intelligence, due diligence, legal, tax and advisory services throughout India and the Asian region. We maintain offices in Delhi and Mumbai and throughout China, South-East Asia, India, and Russia. For assistance with India investment issues or into Asia overall, please contact us at india@dezshira.com or visit us at www.dezshira.com.
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