“India is a Large Untapped Market for Financial Services:” Bay Area Council report

Ritu Jha-


With the objective of providing a platform for building more business and exchange between Silicon Valley and India, the Bay Area Council Economic Institute has released its India-focused report “The Bay Area-Silicon Valley and India: Convergence and Alignment in the Innovation Age”

Sean Randolph, senior director of the Bay Area Council Economic Institute and the report’s main author, told indica much  has changed in the 10 years since the first edition of the report was released. “We decided 18 months ago we need to do this again in great depth,” Randolph said.

“There is a lot of opportunity on one hand, and, to be honest, what is happening in India is still a work in progress. There is a lot to be done still,” he told indica.

The report was released with India’s Ambassador Harsh V. Shringla in attendance, and at the time when India’s recently re-elected Prime Minster Narednra Modi aiming to grow India’s economy to $5 trillion by 2024 and $10 trillion in the following 8 years.

The US and India are facing off on tariff issues, and US Secretary of State Mike Pompeo is visiting India to meet with Modi to discuss a resolution to the two countries differences.

The new report is about current issues, with few comparisons to the older report. “We referred back a little but are looking forward and how things have changed and different kinds of alignments, much more focused on innovation and digitization, and how do we go forward based on this new alignment,” said Randolph.

But the report, with more than 100 pages, does show that barriers have fallen, and many processes have been simplified as a result of the series of key reforms instituted by Modi. The Digital India initiative has intensified the focus on digital capability within India. Cloud services and e-commerce in particular are poised for takeoff: the public cloud services market in India is expected to grow by more than 35% to $1.3 billion in 2020; business to business (B2B) e-commerce is expected to reach $700 billion; and business to consumer (B2C) e-commerce is forecast to reach $102 billion. It is estimated that by 2023, India will have a connected market of up to 700 million smartphones and about 800 million internet users.

The report shows US venture firms, primarily from Silicon Valley, are the biggest players, but after a flood of investment in the early 2000s, some firms left, frustrated by slow returns on investment. Randolph agreed India remains a complex place to do business.

Randolph said the Bay Area is the world epicenter for everything technology, and India too is focused on innovation, entrepreneurship, AI, Cloud, technology, digital everything.

Randolph, who interviewed more than 40 people while working on the report, said, “What I am hearing it (the Indian market) is not perfect yet for venture capitalists. It’s hard to get money out of India. There are many changes on taxes, and so there is this inconsistency of the policies.”

The report shows the imposition of 25 percent and 10 percent steel and aluminum tariffs by the US in 2018 led India to impose retaliatory tariffs in 2019. The US withdrawal of India’s Generalized System of Preferences (GSP) benefits has also exacerbated the trade relationship.

“On the Indian side, government proposals to require data generated in India to be exclusively stored in India and proposed data privacy regulations that are among the most stringent in the world have drawn strong opposition from both Indian and US IT and financial services companies.

Noting that India is a large untapped market for financial services, the report said that the Modi government sees mobility, fintech, and a cashless society as keys to financial empowerment and business growth, providing access for ordinary Indians to credit, insurance, digital payments, and e-commerce.

“Fintech acceptance and adoption have grown rapidly, with the traditionally cash-driven Indian economy responding well to the fintech opportunity primarily triggered by the related surges in e-commerce and smartphone penetration,” the report said.

The shift to digital payments promises to revolutionize India’s economy, and in the process, transform the financial sector. Credit Suisse forecasts that digital payments will become a US $1 trillion market in India by 2023. Bay Area companies like Visa, PayPal, WhatsApp, and Google have made inroads in financial services markets but face competition from local service providers as well as regulatory challenges, the report said.

Observing that the potential for the India-US trade and economic relationship is huge, Ambassador Shringla called upon the Bay Area companies to become partners in India’s growth story.

“In order to achieve the growth trajectory that we have set out for ourselves, we need adequate funding to be channelized in all critical sectors of the economy – be it infrastructure, manufacturing, housing, health, and education,” Shringla said. “As a source of cutting-edge technology in the upcoming areas such as artificial intelligence, automation and robotics, semi-conductors, biotechnology, nanotechnology, electric vehicles and battery storage technologies.”

“US technology can also help in other areas that have economic value, such as space exploration, space mining, renewable energy, healthcare and life sciences, aerospace and defense, agriculture, water through innovation. Third, as a source of employment generation and increasing trade for the mutual benefit of both the countries,” Shringla said.

Meanwhile, Co-chairs of BACEI’s India Focus Dr. Nandini Tandon and Special Advisor to BAC Priya Tandon, both worked on the report, sounded positive despite the tariffs levied by both governments.

Sharing her thoughts on the report, Nandini said, “I think the important thing in this report is that both US-India are a natural ally in making things happen for both their countries and for the globe, and for me that is the most important .”

She agreed that there are challenges  in areas where they are saying  “Make In India” and “Make America Great Again,” but there are huge opportunities and focus needs to be on the opportunity side.

Especially on the medical side, medical devices, accessible healthcare, the creation of Ayushman Bharat – India’s national health initiative – was a very bold move.

Nandini, sounding positive about the report’s outcome said, there is a lot of adjustment going on. The report is outstanding, It covers a very large spectrum, from manufacturing to venture capital to women’s empowerment, healthcare to agriculture and it’s an extensive report.

“I think this would be the cornerstone of many partnership and many conversation, many dialogues, many coming convergence between Silicon Valley and India.

Priya Tandon told indica that India is poised to take off for sure and in the right direction, Now, there is enthusiasm, excitement and investors looking forward.

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