India's increasing economic clout puts it leagues ahead of other developing economies. Bloomberg data suggests that foreign institutional investors pumped $2.06 billion into the Indian stock market in March alone, way ahead of the $259 million that second-ranked South Korea pulled in.

As it turns out, 40% of foreign funds went into two new initial public offerings that listed on the Indian market last month -- indicating that the world doesn't want to miss out on India's booming economy, which is expected to grow 7.4% this year, according to the International Monetary Fund.

Image Source: Getty Images

India's economy isn't going to slow down anytime soon -- HSBC estimates that the country's gross domestic product (GDP) growth will accelerate to 7.6% next year. But the more exciting part is that the Indian economy is expected to enjoy a robust, annual 7.72% GDP growth rate through 2025, as per a Harvard study.

This puts India well ahead of China's projected 4.41% GDP growth through 2025, making it an attractive play for American companies. Not surprisingly, Cisco (CSCO +0.54%), Amazon (AMZN -0.15%), and Microsoft (MSFT -2.04%) have been investing aggressively in India to tap into emerging tech trends that could shape the country's future. Let's take a look at how and why.

Enabling a "smart" India

Indian Prime Minister Narendra Modi has made the early rollout of smart cities his pet project, encouraging local governments to strike public-private partnerships (PPP) to deliver tangible results on this front within the next year. The ministry responsible for India's smart-cities mission has earmarked almost $5 billion worth of projects across 60 Indian cities under the PPP model.

This is great news for Cisco. The networking giant has already minted money thanks to India's smart-city push. Its profit from India operations for the fiscal year that ended in 2016 jumped fourfold thanks to smart cities, with revenue increasing 41% year over year to just over $1 billion. By comparison, Cisco's India revenue had increased just 9% in 2015.

Cisco plans to crack the $2 billion revenue bar in India, and the government's urgency to push the smart-city project before next year's general elections could help the company achieve this ambition soon enough. Cisco has already landed contracts in more than a dozen cities to enable smart-city infrastructure.

But the company isn't banking everything on this project. It has also trained its sights on India's fast-growing digital education market that's currently worth an estimated $2 billion, and is expected to grow 11% to 12% annually over the next three years. To tap this opportunity, Cisco has brought on board 3,000 partners to sell its digital learning solutions across India.

Cisco has kept the entry-level price low for these solutions. For roughly $3 a month, a student can get access to Cisco's products that help with things like letting teachers and students in different locations collaborate. Such pricing can boost Cisco's ambition of moving into India's colleges and universities, as educational institutions could simply add this subscription to existing fees.

So, it may not be long before the country starts contributing a sizable portion of the company's overall revenue. 

Seeing the e-commerce possibilities

India's fast-growing e-commerce market could be a gold mine for Amazon. Morgan Stanley estimates that online retail sales in the country will jump from just $15 billion in 2016 to $200 billion by 2026. Even then, e-commerce will make up just 12% of India's total retail market.

Not surprisingly, Amazon has been pouring money into the Indian market to establish its supremacy over local rival Flipkart, which is reportedly going to be acquired by Walmart.

Flipkart has been rapidly expanding its base in India to survive against Amazon's financial muscle. It recently announced that it will set up a 4.5-million-square-foot integrated logistics facility to strengthen its infrastructure, and Walmart's money could give it  much-needed financial leverage.

But Amazon being Amazon, it won't surrender India easily. The company has resorted to strategies such as reducing seller fees by as much as 70% in categories like groceries and apparel. It now lets Indian merchants sell their goods internationally, opening up markets such as Australia, Canada, the U.S., and several European countries, by shipping items to as many as 11 nations. This opportunity for cross-border sales will be a big incentive for Indian sellers.

An Amazon executive recently pointed out that merchants selling globally are witnessing twice the growth as compared to the ones focusing solely on the domestic market. Amazon could easily use its global presence to woo more sellers and turn the pressure up on Flipkart, which doesn't enjoy that type of advantage.

Such strategies should boost Amazon's already impressive growth in India. In the 2017 fiscal year, the American e-commerce giant saw 105% growth in revenue and a 41% jump in earnings to $485.5 million in India. It won't be surprising if Amazon sustains this terrific momentum as it positions itself to lead India's e-commerce revolution.

Going after India's digital transformation

Software giant Microsoft is already enjoying a solid stint in India, recording terrific growth over the past two fiscal years. In 2016, Microsoft's revenue from India shot up almost 49% year over year on the back of strong retail software sales.

In 2017, Microsoft's Indian revenue increased another 30% thanks to a 33% jump in software sales. Looking ahead, Microsoft's software sales in India should get better thanks to the company's latest strategy of going after the country's digital transformation. A recent survey conducted by Microsoft found that Indian organizations aspire  to deploy technologies such as cloud computing, artificial intelligence (AI), and the Internet of Things (IoT) in the coming years.

Microsoft claims that business leaders expect to improve key areas such as productivity, customer service, and profit margins by at least 40% by 2020 by relying on emerging technologies -- innovations that are expected to add $154 billion to the country's GDP in the process. The software specialist has decided to make a play on India's digital transformation by expanding its ecosystem of partners.

Microsoft currently has 9,000 partners spread across 250 cities in India that use its software solutions in their businesses, and it wants to increase that number. The company is now directing its energy toward striking partnerships in IoT, AI, blockchain technology, big data, and others, to tap into these emerging tech trends.

The company already has 650 partners in deploying IoT and cognitive services, including big names such as ride-sharing giant Ola and Flipkart. Ola, for instance, is using AI and IoT to bring customized digital experiences to its riders. Flipkart is tapping Microsoft's AI for image recognition to give customers more information about a particular product, thereby enhancing the shopping experience.

So, Microsoft's moves to tap into India's digital transformation should help it strengthen revenue growth there going forward.

The verdict

All three American tech giants have been clocking impressive growth in this emerging market already. But the more important point is that they have been attacking areas with vast potential, which means that Cisco, Amazon, and Microsoft can mine this market for a very long time.