Standard & Poor's Ratings Services said that India offers vast business opportunities in a variety of areas due to a large middle-class population, growing consumer purchasing power, and large unfulfilled demand for a number of products and businesses.
However, businesses face stiff hurdles in the way of capitalising on this potential.
Addressing the media and investors in a conference call, Standard & Poor's credit analyst Sharad Jain, director in the Asia-Pacific Corporate and Infrastructure Ratings Group said: "India has demonstrated global competitiveness in businesses such as information technology, and business process outsourcing.
"However, what is not so well known is that mobile telecommunications operators in India price a call at about US4-5 cents a minute, which is among the lowest world-wide. Given the enormous volumes, some of the larger players are expected to make money even at these prices."
A large, educated, and English-speaking working-age population provides Indian businesses a competitive edge over many other developing nations.
Talking about the challenges, Mr Jain said, "Infrastructure has proven to be a key constraint. The higher cost, and lower quality and reliability of electricity, road transport, rail transport, ports, and water supply continue to hamper sustained high economic growth in India."
Frustrating labour laws, and continued reliance on timely rainfalls for a large part of the economy, are some of the other impediments affecting the Indian industry.
"It is critical that the businesses manage their growths prudently. They need to guard against creating excess capacity, or aggressively leveraging up the balance sheets. Running larger businesses can also challenge the management resources," said Mr Jain.
Standard & Poor's also cautioned investors against getting carried away by the current enthusiasm on India. "Low interest rates and booming equity prices are partly responsible for the strong sentiment on India.
However, these factors are often beyond the control of the government and businesses in India, and therefore can change very quickly," said Mr Jain.
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