If you have kept pace with the previous stories from our China Week series, one thing is clear. There is a lot of interest from Chinese investors to back Indian startups. From large conglomerates like Tencent and Alibaba to several smaller largely-unknown institutional and corporate VCs, it wouldn’t be wrong to say that Chinese investors are actually lining up to put their considerable muscle to aid startups in India.

So what explains China’s love for India?

Conventional wisdom tells you that bullishness on India is pivoted on this popularly-held belief that India is the ‘next China’. That India is on the cusp of an internet revolution with a potential market of hundreds of millions of users ready to come online to spend their time and money. An adage that finds prominent mention in many a funding pitch deck is that “India is where China was ten years ago”.

But is this really true?

India is not China

Despite being somewhat similar in terms of size, development stage and culture, India is nothing like China. Specifically, when it comes to startups. Unlike their Chinese counterparts, Indian companies do not have the advantage of a protected domestic market where foreign behemoths are kept out and the government supports startups, both actively by funding as well as passively by providing aid in the form of regulations and other soft infrastructure subsidies. For an Indian startup to emerge as the dominant company in a particular sector, it has to best foreign behemoth competitors like Amazon or Uber. Not a trivial challenge by any means.

So India is different from China in some respects but still, the formidable size of the Indian middle class is a tempting proposition as a potential market, right?

Pundits routinely bandy about numbers such as 450-500 million as the size of the online population in India but if you scratch the surface, the numbers are not quite as inspiring. For instance, according to a recent study by AT Kearney, only 39 million people in India have ever bought something online. According to this study, “The Global Retail E-commerce index”, this number means that India does not even figure in the top 30 e-commerce markets in the world. Other studies peg the number of transacting users at a maximum of 60 million. Keep in mind that this figure is what we have achieved after spending billions of dollars in discounts and marketing, evangelising the supposed benefits of online commerce.

How does this 60 million figure compare with China?

According to a Bernstein report, there are 450 million e-commerce users in China. More importantly, even at this scale, the top lines are growing.

700 million Chinese were online at the end of 2016, versus a population of approximately 1.4 billion. According to projections by Euromonitor, internet user growth in China will rise from 50% in 2015 to nearly 75% by 2020 as connectivity via broadband and 4G improves.


Sumanth Raghavendra

Sumanth is a serial entrepreneur with more than eighteen years experience in running startups. He is currently the founder of Deck App Technologies, a Bangalore-based startup attempting to re-imagine productivity software for the Post-PC era. Sumanth’s columns appear regularly in leading publications. He holds MBA degrees from the Indian Institute of Management, Bangalore and Thunderbird, The American Graduate School of International Management, USA.

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