A growing number of American companies are turning to India to recreate or replace their China experience, as profitability and grip on the Chinese market starts to slip.
Apple has completed a trial run of the first-ever iPhones assembled in India, "a small number of iPhone SE," the company told CNBC on Tuesday. The iPhone SE is one of its lower-priced models already available in India.
Armed with their massive war chests, drug manufacturers, big-box retailers and information technology behemoths are racing to expand their businesses to India. Many richly valued Silicon Valley start-ups are also beginning to crack — or even be founded within — the Indian market.
The world's fastest-growing economy, with the GDP hovering around 7 percent, India has edged ahead of China and is growing much faster than the developed world. It's also currently the world's third-largest economy, on course to eclipse the United States to become the world's second-largest economy by 2050, according to a recent PricewaterhouseCoopers report.
Close to ideal demographics puts India in a sweet spot. Nearly two-thirds of India's 1.2 billion population is under the age of 35, making it one of the largest consumer markets that foreign businesses are hungry to tap.
While there's little doubt about growth opportunities in India, they are scattered over an obstacle course of opaque rules, inconsistent regulations and other hurdles, including deeply rooted corruption. Foreign businesses like Apple need to contend with challenges even before, and while, dealing with some of the more commercial issues of price sensitivity, a crowded and competitive market and raw material sourcing.
India's endemic corruption is one of the biggest drags on its attractiveness as a place to do business. U.S. firms, particularly those frustrated with Chinese red tape and corruption, will find themselves in no better position in India.
Gandhi, who has set up manufacturing operations in both China and India, the latter more recently as global forces require more companies to seek out new, low-cost manufacturing locales, said there is only one option: Deal with it.
"Many American companies fail in India because they're afraid to get on a plane and get their hands dirty. If you have a bad attitude going in, you've already lost the battle," he said. "Success overseas takes persistence and unrelenting drive. … Like most aspects of business, setting up an Indian operation is messy and can be very hard."