India is set to become the world's most populous nation this year, overtaking China, according to the latest UN report on the global population.
India, which has a predominantly young population, is the world's fifth-largest economy and on course to become the fastest-growing major economy in the coming years despite global headwinds caused by post-pandemic spillovers, supply chain disruptions related to the war in Ukraine, and potential recessionary pressures facing developed economies.
Thailand and India have enjoyed close ties historically in various dimensions, especially arts and culture. India is regarded as a key Thai trade and investment partner, while a number of large Thai corporations have established their businesses in the country, including Charoen Pokphand Group, Thai Union Group Plc, SCG Trading, Pranda Jewelry Plc, Srithai Superware, Thai Summit Autoparts Industry, and Rockworth.
As India's population swells, this is likely to create several layers of challenges for the country. It will need to reduce poverty, provide education, manage soaring demand for food and invest massively in urban infrastructure to support its growing populace.
Many observers suggest having a large demographic of young people gives India an advantage over other Asian economies grappling with an graying populace. With more than half of the country's population under the age of 25, some pundits believe India's workforce has massive potential to propel economic growth.
Thai business leaders agree the country offers bright trade and investment prospects, but also warn of barriers, particularly India's protectionist policies.
WEALTH OF OPPORTUNITY
Sanan Angubolkul, chairman of the Thai Chamber of Commerce, said India is the largest market in South Asia. Its economic growth remains resilient and is expanding rapidly.
The Indian economy is on track to grow by 6.6% this year, according to a World Bank forecast.
India is highly likely to become the world's third-largest economy by 2030, overtaking Japan and Germany, said Mr Sanan, attributing the growth prospects to large domestic markets and consistent government efforts to strengthen the supply side through reforms, such as production-linked incentive schemes, national logistics reforms, and fostering ease of doing business through digitisation.
The nation also looks set this year to surpass China as the world's most populous country, projected to reach 1.417 billion compared with 1.412 billion for the Middle Kingdom.
"The focus on India should not be related to its population," he said.
"The chamber is targeting Thailand's opportunity to tap into India's middle class, which accounts for up to 30% of the population or 400 million people. This segment is mostly working age and boast relatively high purchasing power. Indians are also highly skilled in English, a key component that helps the country to develop its economy at a faster pace."
On the economic front, Thailand sees India as an interesting market and trade between the two countries posted strong growth.
Last year, bilateral trade amounted to US$17 billion, a rise of 18% from 2021. Of the total, Thai exports to India accounted for $10.5 billion, up 22.5% from 2021, with imports tallying $7.1 billion, up 12%.
India is categorised as a secondary market for Thailand, which still has huge capacity to expand its trade.
Thai investment in India, valued at $1.16 billion, ranked 27th in terms of foreign direct investment in the country between 2000 and June 2022.
According to Mr Sanan, Thai investment in India is projected to continuously expand.
Many large Thai corporations in sectors such as food, aquaculture, processing, dairy/ready-to-drink yoghurt, packaging, rubber products, construction materials, jewellery, furniture, auto parts and solar energy have already established a presence in India, while Indian businesses offer high potential and expertise in the fields of pharmaceutical production and technology.
"The Thai chamber still sees a lot of challenging issues the Thai government needs to tackle more quickly, particularly regarding several frameworks for free trade agreements [FTAs] between the two nations, such as the Regional Comprehensive Economic Partnership [RCEP], Asean-India FTA, and Thai-India FTA, to help eliminate import tariffs and existing trade obstacles," he said.
NATIONALIST AGENDA
Boosting trade and investment in countries outside of Europe, the US and China is desirable, but it will not be easy for Thai businesses seeking new opportunities in India, said the Federation of Thai Industries (FTI).
The Indian subcontinent has a large market size, but New Delhi's policy of protecting local businesses makes expanding trade there quite a challenge, said Kriengkrai Thiennukul, chairman of the FTI.
"India is full of opportunities and challenges for foreign investors and exporters because of its large population and middle class," said Mr Kriengkrai.
He said the question is, who will satisfy this massive consumer demand -- Indian or foreign businesses?
Indian Prime Minister Narendra Modi implemented a "Made in India" policy aimed at supporting and strengthening local businesses.
The policy led prospective foreign investors to consider forming joint investments with Indian partners. Others devised investment proposals that are in line with the policy to avoid trade barriers.
"The Made in India policy is part of Mr Modi's efforts to make India a second 'world factory' after China," said Mr Kriengkrai.
"He wants to create more jobs, increase domestic investment and depend less on imported goods to reduce the trade deficit."
Mr Kriengkrai said he is not surprised by India's decision not to join the RCEP free-trade pact.
He said New Delhi does not want to see low-priced products from RCEP member China flooding its domestic market, which would affect thousands of small and medium-sized enterprises.
Thai exporters are also suspicious of India's protectionist trade policies, which are affecting some local shippers, said Mr Kriengkrai.
Thai manufacturers of air conditioners claim they face a trade barrier when exporting their products to India, he said.
Producers are now required to add refrigerants to air conditioners because of regulations, which increases their export costs. This rule was never enforced in the past, said Mr Kriengkrai.
Protectionist policies are causing some Thai investors to consider setting up factories in India to avoid trade barriers, he said.
The Joint Standing Committee on Commerce, Industry and Banking expects Thai export growth to decrease to 1-2% this year as economies in the EU, the US and China may decelerate, as predicted by the International Monetary Fund.
This outlook may cause Thai entrepreneurs to look for new trade and investment opportunities in other regions, especially India, as markets in South Asia and the Middle East offer strong growth potential, said Mr Kriengkrai.
SPECIFIC SWEET SPOTS
In 2021, the number of Indian tourists visiting Thailand tallied 990,000, second only to Malaysia.
The number of Indian arrivals is expected to surpass 1 million this year.
Bhummikitti Ruktaengam, advisory chairman of the Phuket Tourist Association, said India is a growing market for tourism, but only a particular segment.
While the country has a massive population, many of them cannot afford to travel to other countries in the near future, said Mr Bhummikitti.
Tourism operators need to study how each age group or segment has the potential to grow, he said.
Mr Bhummikitti singled out digital nomads, which he said is a promising segment in line with the tech sector in India. He said this cohort represents a growth area for Thai tourism because they can work remotely while taking leisure trips in Phuket.
Last year Indian travellers were the top source market for Phuket tourism for several months before Russian visitors took over the top spot in the final quarter.
Mr Bhummikitti estimated at least 200,000 Indian tourists would visit Phuket this year.
Although the Indian government still requires its citizens to provide negative RT-PCR tests upon their return, he expects this rule might be scrapped in the first quarter of 2023.
"The peak season for Indian tourists is around June to September, when they prefer to escape the hot summer in their hometowns," said Mr Bhummikitti.
He said the other segments with spending power include families, weddings, and the Mice (meetings, incentives, conventions and exhibitions) sector, particularly meetings with only 50-150 participants.
These segments tend to stay for 3-5 nights on average, said Mr Bhummikitti.
However, he said one weakness is Thailand still lags behind neighbouring countries in understanding the nature of family segments, Indian culture and Indian food.
For example, Thailand doesn't have a great diversity of Indian food when compared with Malaysia, said Mr Bhummikitti.
In terms of the Mice segment, Thailand still faces stiff competition from Singapore with regard to facilities, while Vietnam has the edge over Thailand on pricing strategies, he said.
CHANGING MINDSETS
Pun-Arj Chairatana, executive director of the National Innovation Agency (NIA), said India is gearing up to build technology businesses and startups, aiming to play a crucial role in Asean, where China and Japan have a dominant influence at present.
"Thailand is close to India, as the latter love to invest and stay here," said Mr Pun-Arj.
The most important issue for Thais is to change their mindsets and understand India's development and culture, as well as gain insights into their trade and investment, he said.
India is scaling up its infrastructure development and manufacturing sector through its policies, while building up a burgeoning middle class, said Mr Pun-Arj.
India, like Thailand, has been promoting its startups over the past few years, but with more sizeable investment than Thailand, he said.
"Indian unicorn startups are very successful," said Mr Pun-Arj.
As of Sept 7 last year, India was home to 107 unicorns with a total valuation of $341 billion, according to Investindia.gov.in.
"We have to work closely with the India-Thai Chamber of Commerce and capitalise more on the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation, while connecting people of Indian origin in Thailand with businesses from India," he said.
Thailand can attract Indian investors, entrepreneurs, startups and talent, while working with them, said Mr Pun-Arj.
He said Thailand's food technology, including plant-based production, has a great opportunity to tap into India, where there is a huge population of vegetarians.
