That said, there is plenty of good news, too, and investment opportunities exist in niche areas. India has always leapfrogged ahead in innovation, skipping layered growth.
The wireless revolution in India happened, as an example, before fixed line. Wireless connections bypassed fixed-line connections in 2004, but wireless Internet usage has also passed fixed-line Internet usage in 2012.
E-commerce is leaping. It has created a larger footprint in a shorter time than store retailing. E-commerce in India, currently $2 billion, constitutes 0.25 percent of the overall retail industry. In comparison, e-commerce as a percentage of retail is 6 percent in China, 9 percent in the U.S. and 4 percent in Latin America. Growth in e-commerce in India thus looks immense. Justdial, India's version of Yelp, is a good example.
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Mobile banking is also exhibiting huge growth and will probably replace credit and debit cards. India will predictably apply fresh restrictions (e.g. protocols, new net worth norms) after it experienced some pain (after some scam or loss as in the Vodafone case), thus making the country a follower rather than a leader in this space. In the past, such restrictions have slowed growth initially but saved money and resources over the long term, benefiting local players, including Bharti Airtel.
In health care, additional insurance schemes have increased the propensity to spend. New opportunities exist in hospital growth, doctor and nurse training, medical record-keeping and all ancillary businesses that support health care. Take Apollo Hospitals, expanding by getting more and more single hospitals into its fold. Its brand allows it to charge premiums. Another sector is pathology lab companies, which have received venture capital investments. One, Dr Lal Pathlabs, is expected to list soon at a value of $850 million.
In pharmaceuticals, India is now a serious global player, featuring companies including Sun Pharma and Cipla. In generics, India controls a significant part of the world market. Multinational pharmaceutical companies are investing in India, as they find it a cheap place to manufacture, as well as to gain the fringe benefit of the potential huge local-growth opportunity.
In April 2013, Unilever announced a 21 percent premium to market bid to buy back 22.5 percent of its local subsidiary HUVR:IN, valued at $5 billion. Other long-term players, such as Diageo and GlaxoSmithKline, have recently increased their ownership in their local subsidiaries. These are positive signals.
—By Pashupati Advani, founder of India-based cross-border business consulting firm Global Foray and member of the CNBC-YPO Chief Executive Network.
CNBC and YPO (Young Presidents' Organization) have an exclusive editorial partnership. It consists of regional Chief Executive Networks in the Americas, EMEA and Asia-Pacific. These Chief Executives Networks are made up of a sample of YPO's unrivaled global network of 20,000 top executives from 120 countries who are on the front lines of the economy. The opinions of Chief Executive Network members are solely their own and do not reflect the opinions of YPO as a whole or CNBC.