How foreign companies can win in India

India's demographics offer a wealth of opportunities for foreign firms. Where to start? An expert on Indian business offers some tips.

There are many good reasons to invest in India, not least because it is set to become an economic superpower in less than a decade.

With a population of 1.2 billion, more than half of whom are under 24 years old, India has seen its GDP grow at more than 7 per cent a year, and the country was ranked the fourth largest in the world in terms of GDP (purchasing power parity) in 2011, according to the CIA world fact book.

So the facts are certainly in favour of investment but how do you make the most of the opportunities. Richard Heald of the UK India Business Council provides some top tips on winning in India

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Find your supply-chain niche

As with any new market, it is vital to find the part of the supply-chain where you can add the most value. In India, firms are trying to dominate 'the last mile' - the business of delivering end products.

"India is developing last mile provider status, and has invested vast amounts in this. But that means there's a good chance to integrate with their supply chain," says Richard.

"For example, healthcare is done in country, but the technology comes from outside."

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Take your partner...

Some companies, such as logistics provider Kuhne and Nagel, are entering the Indian market alone. But having an Indian partner can offer a real cost advantage. "Pick the right partner - go for a significant player," he counsels.

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Be aware of talent issues

Comparing the Mumbai skyline to that of Manhattan, Heald points to India's status as the largest democracy in the world, and the only BRIC nation where the average age is getting younger. Indeed 25 per cent of the world's 25 year-olds are Indian and 25 million join the workforce every year.

At present, however, there is a skills bottleneck: "The talent pool in India is very good; the problem is that there are not enough of them. There are real constraints because of this, so we find India's temporarily outsourcing some component manufacturing to China."

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Don't ignore the second cities

Heald advises foreign businesses to consider India's second tier cities - the 40 conurbations with a population of over a million.

Besides the established centres of Delhi, Mumbai, Chennai and Bangalore, there are a number of emerging cities such as Hyderabad, Kolkota and Pune that could be attractive to foreign investors. In some of the second tier cities, GDP growth can be double the national average.