Observations and Learnings from India: What’s changed from 2019 to 2023?
I spent a week in India after having yet to visit since 2019. Naturally, curious to see how business culture and consumer behavior evolved, Indian contacts and friends were happy to share their perspectives. On the one hand, there have been some palpable changes over the last four years, including payments, tech wages, and remote work. On the other hand, much has stayed the same, including frugality, caste, and chrysophilia.
Business Culture
The Indian government's decision to adopt and implement UPI, an instantaneous cash transfer system similar to WeChat Pay, at this point, largely obviates the need to carry cash. I feel safer walking around India without taking a lot of cash.
Like the US, white-collar workers work remotely about 1/3 of the time, and firms are having trouble getting software engineers to return to the office at all. This has resulted in significant demand for more extensive flats for additional home office space requirements.
Before COVID, some firms felt that production could only take place from the office and were generally skeptical of remote work. Post-COVID, firms are far more open to the idea of partial or fully remote work than they were previously. Once you get comfortable with fully remote work, the willingness to consider cost-reduction-oriented BPM increases dramatically. Global companies are even more willing to outsource aspects of their business to Indian business process management firms than ever in the past. Interestingly, BPM firms are some of the most well-equipped to benefit from recent developments in AI and may be able to handle more business with fewer employees going forward.
Indian tech companies struggle with retention. Top product engineering and research talents effectively command wages like those in leading US firms. This has made hiring and retaining the best engineers much more costly; however, firms still believe keeping these people is worth it because a top engineer can be more productive than 100 average-quality engineers. Also, note that graduate degrees are not required for Indians to get paid at the highest wage bands.
Ten years ago, top graduates from IIT would have wanted to move to the US vs. stay in India at a rate of 95% to 5%. However, now that wage rates for top engineers have normalized with US levels, I learned that the situation has flipped. Today, about 90% of top IIT engineers want to stay in India, and only those wishing to pursue PhDs in CS or engineering would like to move to the US for further study. It seems that choosing $225k in Bangalore over $350k in Mountain View is an easy decision for most Indians.
We’ve heard that young Indians are more willing to take entrepreneurial risks than their parents or grandparents generations. Becoming a lifer at Infosys or The Ministry of Railways may have been viewed as the dream job in the past, but that may be changing. Combined with the relative wage rates, a desire to stay local, and an increased willingness for younger people to take entrepreneurial risks, the prospective environment for venture capital may be better in India than in the previous few decades.
The female labor force participation rate has always been one of the biggest challenges for India. However, in the last five years, the rate has been increasing modestly for the first time since 1994. If India can better enfranchise women into the economy, it could be a tremendous tailwind; however, many sociological and religious barriers remain; from the women I talked to, traditional gender roles and the expectations to conform to them remain very strong in most parts of India.
Consumer behavior
Indian consumers remain incredibly conscious of value-for-money tradeoffs. Indians will hunt to save 100 INR and try to take advantage of all possible VC CAC. I heard stories of people taking free trips around India paid for by Uber shareholders; one customer bought 300 cheap mobiles from Jio and received 300 free rides in sign-up bonuses from Uber. Upstart coffee chains like Third Wave Coffee have grown in popularity specifically because they offer bean quality near Starbucks, a slightly trendier atmosphere, but offer a price point of 10% to 20% cheaper.
While people enjoyed ordering takeout during COVID, with takeout/delivery firms enjoying triple-digit growth for a time, broadly consistent with most other countries, food delivery-related businesses have generally struggled over the last year as people returned to pre-COVID takeout trends.
Notwithstanding demonetization and other policies related to limiting gold hoarding. Indians remain gold-hungry, particularly around marriage ceremonies. Due to gold’s strong outperformance during COVID, many Indians feel vindicated that it can hedge inflation and remain a resilient investment during challenging times.
The Caste system remains alive and well. Marrying outside of one’s Caste remains extremely rare. When I asked friends how often they have seen this happen, the most common response was when an Indian marries a foreigner. Marriage continues to be primarily intermediated by matchmakers within the family, not dating apps as is expected in the US. Four years ago, dating apps were reputed to be taking share, but it seems it was mostly for casual sex and shorter-term relationships.
Coming from Philadelphia, the level of poverty present throughout Mumbai and Bangalore remains overwhelming. Seeing badly malnourished children sitting in the streets picking trash breaks your heart.
Economic development has certainly improved people's lives in significant ways. At this point, about 50% of Indians have access to the Internet, and almost everyone at least has a feature phone. For 3,000 INR per year ($37.00), users can enjoy 2.5 GB/per day of data and 4G service, which is affordable for most Indians.