Establishing an Indian Entity Is Not the End, But the Beginning

Expanding into India: A Strategy for Reaching South Asian and Global Supply Chains

-Expansion Strategy into South Asia and the Global Supply Chain- When companies enter India, the first thing they look at is the massive domestic market of over 1.4 billion people . However, if you look at India from a broader perspective, the story changes. India is a huge market in itself, but it can also serve as a hub for production, procurement, logistics, and exports connecting South Asia, the Indian Ocean, the Middle East, Africa, and Europe. According to the Indian government, India shares land borders with seven countries, including Afghanistan, Bangladesh, Bhutan, China, Myanmar, Nepal, and Pakistan. By sea, it connects with Indian Ocean nations such as Sri Lanka and the Maldives. Of course, sharing a border does not mean having the same relationship with each neighbor. Each country has different political, security, and economic ties, and the nature of these relationships is constantly evolving alongside China’s expanding influence, Middle Eastern geopolitics, and global supply chain restructuring. How, then, should Korean companies view India’s neighboring countries? The key is not asking "Should we enter neighboring countries right now?" but rather understanding "Which countries can our Indian entity connect with in the future?" 1. Neighboring Countries: A Network of Diverse Relationships, Not a Single Market Looking at India’s neighboring countries simply as "markets to export Indian products to" makes it difficult to understand the actual reality. Simplifying these country-by-country relationships yields the following: Category Key Countries Relationship Characteristics Security & Political Tensions China, Pakistan Border and security issues impact economic relations. Economic & Energy Cooperation Nepal, Bhutan, Sri Lanka Close ties in trade, power generation, infrastructure, and human exchange. Coexistence of Cooperation & Variables Bangladesh, Myanmar Trade, logistics, security cooperation intertwined with domestic and international politics. ☞ Note: The above categorization is not absolute, but a practical perspective for Korean companies to understand regional dynamics. Nepal, in particular, is a prime example showing that India’s regional network cannot be explained by simple commodity trade alone. India and Nepal share long-standing human exchanges and are interconnected across trade, electricity, cross-border infrastructure, and transportation. For instance, cooperation in exporting Nepal’s hydroelectric power to India is expanding, and cross-border power grids and transit infrastructure are crucial elements linking both economies. ▶ Key Factors to Consider in Neighboring Relations: Goods: Movement of raw materials, components, and finished products People: Movement of labor, tourists, and skilled professionals Energy: Energy supply chains including power, oil, and gas Logistics: Roads, railways, ports, and border-crossing networks Capital: Investments, finance, and development cooperation Culture: Interpersonal exchanges through religion, food, and festivals ☞ India’s relationship with its neighbors is closer to a network of interconnected nations through various ties , rather than a single unified "economic zone." 2. People Moving Across Borders: Another Economic Connection Network When understanding India’s neighboring relations, the movement of people cannot be overlooked. India is one of the world's leading labor-exporting nations, maintaining particularly strong human and economic connections with Gulf Cooperation Council (GCC) countries such as the UAE, Saudi Arabia, Qatar, Kuwait, and Oman. Indian workers are active across construction, services, healthcare, and more, and their remittances play a crucial role in the Indian economy. Conversely, India is also connected to labor mobility within South Asia. Labor inflows from countries like Nepal and Bangladesh serve as a vital pillar of manpower in certain manufacturing, construction, and service sectors in India. Add tourism and cultural exchanges to the mix, and the deep-rooted cultural ties—such as religion, cuisine, and festivals—further strengthen these connections. As tourism and human mobility expand not only with immediate neighbors but also with Southeast Asia, the movement of people itself is creating a new economic connectivity network. ☞ "Economic connection" does not mean goods alone. When people move, labor markets connect; when tourists move, consumer markets connect; and when companies move, capital and technology travel together. Therefore, understanding India's influence requires looking not only at "Where are Indian products exported?" but also "Where are people, capital, and technology moving?" 3. China’s Growing Influence: Neighboring Countries Do Not Choose Just One Side Another indispensable variable in India’s regional relations is China's expanding footprint . Through the Belt and Road Initiative (BRI), China has actively participated in infrastructure projects—such as ports, railways, roads, and energy—in countries surrounding India. Chinese investment, financial support, and infrastructure projects have continued in Bangladesh, Sri Lanka, Nepal, the Maldives, and Myanmar. Consequently, analysts often highlight the economic and diplomatic competition between India and China in the region. However, one important caution is necessary here: ▶ It cannot be viewed through a simple "India vs. China" binary. India's neighboring countries do not simply choose between China or India. Instead, many pursue a strategy of maintaining relations with both nations to maximize their own economic interests and diplomatic autonomy. This provides an important insight for Korean companies: just because China's influence grows does not automatically mean India's influence weakens, nor can we assume India will unilaterally dominate its neighbors. Therefore, businesses need to evaluate three main factors together: Changes in India–Neighbor Relations: What shifts are occurring in logistics, customs, and trade environments? Chinese Investments & Infrastructure: Which regions are being connected by new ports, railways, and logistics networks? Balanced Diplomacy of Neighboring Countries: How are these nations balancing their choices between India and China? ☞ The key question is not "Who wins?" but rather "How do these changes impact our company's supply chain?" 4. Companies Starting in India and Expanding Outward How should companies entering India actually view neighboring markets? The vital approach here is not "directly expanding into neighbors from India," but rather "utilizing India as a production, procurement, and export hub." A representative example is Hyundai Motor Company . Hyundai has not treated India merely as a domestic market, but has developed it into a global manufacturing hub handling both production and exports. Samsung Electronics and LG Electronics have similarly established production and sales bases in India, linking them to various international markets. ▶ However, enterprise strategies cannot be applied directly to SMEs (Small & Medium Enterprises). For Korean SMEs, entering neighboring markets may not be the immediate priority during the initial stages of entering India. Instead, establishing fundamental local operations should come first: Securing local customers Hiring local Indian talent and labor management Tax and legal compliance Building a local supply chain Quality and production control Establishing relationships with local partners Securing stable logistics networks Managing this foundation alone requires significant management capability and time. ☞ Expanding into neighboring countries is most realistically viewed as a mid-to-long-term growth engine to consider after Indian operations stabilize. Entering India does not mean you must enter neighboring markets simultaneously. Securing competitiveness in India first—and then connecting to neighboring countries and global markets based on operational and supply chain needs—is a far more realistic strategy. 5. More Important Than "Where to Enter": "Where Are We Connected?" A common question when preparing to enter India is: "Which region in India is best for establishing an entity?" While this is an important question—requiring manufacturers to evaluate industrial clusters (automobile, electronics, chemical, machinery) along with logistics infrastructure like ports, roads, and railways—decisions should not be based solely on city names. ▶ Example of Major Industrial Hubs: Region Key Characteristics Delhi NCR Largest consumer market in North India & manufacturing/logistics network Chennai / Tamil Nadu Automotive, auto components, and electronics manufacturing cluster Pune / Maharashtra Strong automotive, machinery, and manufacturing base Gujarat Industrial Belt Manufacturing, chemical, automotive, and port logistics hub Bengaluru IT, R&D, startups, and high-tech industries Hyderabad IT, pharmaceuticals, R&D, and high-tech industries Questions You Must Ask Beyond City Selection: Where are raw materials procured from? Which ports will be utilized? Where do components come from? Where do finished goods move to? Which countries can be exported to in the future? An Indian entity's location should be decided based on the "future supply chain map," not just the "current factory site." ☞ Recently, India has been expanding its external economic cooperation through trade and economic partnership agreements—such as the Trade and Economic Partnership Agreement (TEPA) with the European Free Trade Association (EFTA) and trade negotiations with the UK. FTA negotiations with the EU have also seen progress, alongside ongoing negotiations to upgrade the Korea–India Comprehensive Economic Partnership Agreement (CEPA). Therefore, India should be evaluated not merely as a domestic market, but as a production, procurement, and export platform capable of connecting with various countries worldwide. 6. Why You Must Understand the Region Even If You Don't Expand Immediately Not every company needs to consider neighboring markets at the same time they enter India. For SMEs in particular, setting up an Indian entity, handling local staffing, labor, tax, customer acquisition, and supply chain building already present plenty of tasks. Depending on the industry, regional politics may have minimal impact on actual operations. Why, then, is it necessary to understand the surrounding countries? ▶ Not to "enter right now," but because "they can become supply chain variables in the future." The global economy is currently experiencing supply chain restructuring, protectionist industrial policies, and economic regionalization. Combined with geopolitical instability in the Middle East, factors such as energy prices, ocean freight rates, insurance costs, and transit times are increasingly likely to impact costs and delivery schedules. In this environment, relying heavily on a single country for a supply chain carries risk; evaluating multiple production, procurement, and logistics routes is essential. The Supply Chain Mindset Shift: Past: Enter India → Secure Indian domestic market Present: Enter India → Local production & procurement → Indian domestic market + exports → Evaluate connectivity with neighbors, Middle East, Europe, etc. The core objective is not "expanding everywhere." It comes down to knowing three things: Where do our raw materials come from? Where do our products go? Which countries and shipping routes are involved in the process? Simply knowing the answers to these three questions serves as the starting point for adapting to global supply chain shifts. Conclusion: India Is Not the End, But a Starting Point for Global Supply Chains Entering India does not mean you must expand operations into Nepal, Bangladesh, Sri Lanka, or the Middle East. For many companies, there is no need to worry about neighboring markets right now. What matters is not viewing India solely as a single, massive domestic market. India connects South Asia with the Indian Ocean, links to maritime logistics routes reaching the Middle East, Africa, and Europe, and occupies an increasingly pivotal position in global corporate production, procurement, and export strategies. Therefore, the strategy Korean companies build in India should focus less on "How many neighboring countries can we enter?" and more on "Which supply chains can our Indian entity connect with in the future?" Focusing strictly on the Indian market at first is completely fine. Once local operations stabilize and production and supply chain systems are established, the business can expand its connection scope to neighboring countries, the Middle East, and Europe as needed. India can be both a destination and a starting point leading to other markets. Enter India with its 14 billion consumers in mind, but do not let your vision stop at its borders. Looking at where India connects within changing global supply chains—and identifying the opportunities those connections create for your business —will be the defining starting point for your future business strategy in India.