Beware India’s manifest destiny.
Though still labeled an emerging market, one could argue that the Indian economy has already emerged. According to Forbes’ list of international billionaires, four of the top 10 are Indian. And with an annualized five-year total return of 42.2%, Forbes ranked India second after Brazil in its assessment of the growth of the world’s largest public companies. The U.K., with a growth percentage of 17.1%, and the U.S., with 11.1%, occupy two of the last three spots on that list. The balance of power is starting to shift.
This discrepancy is understandable given the context; it is more difficult for established companies in the U.S. and U.K. to grow as quickly as those expanding from nothing, as is the case for start-up companies in India. Nevertheless, these figures highlight an important trend. As the Indian economy continues to spread its wings, its companies are turning to new international markets.
Could this be the beginning of a reverse imperialism?
During the 18th century, the British first annexed and then colonized India, seeking to exploit the subcontinent’s vast natural resources and to expand trade. Tea became an important commodity and came to symbolize British colonial rule.
How times have changed.
In 2000, Tata Tea–a member of India’s Tata Group conglomerate of 27 publicly listed companies–bought Tetley, the U.K.’s largest tea company. Tata Tea now represents the second largest tea manufacturer in the world by volume, surpassed only by London- and Rotterdam-based Unilever.
What is driving India’s expansion? “Unlike China where companies are state- and government-led, in India, it is people’s own money,” says Tarun Khanna, a professor at Harvard Business School and author of Billions of Entrepreneurs: How China and India Are Reshaping Their Futures and Yours.
In March, another subsidiary of the Tata Group, Tata Motors (nyse: TTM – news – people ), acquired Jaguar and Land Rover from Ford Motor (nyse: F – news – people ) for $2.3 billion. It’s another example of originally-British brands being scooped up by an old colonial friend. While the two brands will continue to follow their own business plans, Tata Motors hopes they will boost the company’s ability to be a “meaningful player in the global market,” says Debasis Ray, head of corporate communications at Tata Motors.
The company recently unveiled its Nano model in New Delhi. Touted as “the people’s car,” the small four-seater with a price tag of $2,500 is said to be the least expensive car in the world.
The monetary muscle behind the quest for new horizons is fuelled by a cheap domestic labor market and Indian companies’ high price-to-earnings ratios, according to Khanna. Smaller Indian companies can more easily collaborate with bigger counterparts in other markets–even those in other former colonies.
Last week India’s biggest telecom, Bharti Airtel, called off merger talks with South Africa’s largest provider of cellphone service, MTN Group, citing disagreements over the terms of the deal. Reliance Communications, India’s second-largest telecom, subsequently announced it was entering talks with the South African company. A resulting MTN-Reliance merger would result in over 100 million customers, a larger network than AT&T.
The shared colonial past, actually, is an advantage. The British Empire, Khanna believes, created a legacy whose repercussions are felt in India and in Africa’s eastern and southern regions. “Imperialism is laying the seeds of global chess, with Indian companies naturally capitalizing on their shared history,” he says.
Perhaps other nations should prepare for a new breed of imperialism. This time, we will be pouring the tea.