And why it's the No. 1 most interesting economy
SMITH BRAIN TRUST – With modest economic growth across advanced economies and slowing growth in China, India is taking center stage as the economy to watch.
“India is perhaps the No. 1 most interesting economy in the world,” says Maryland Smith’s Anil K. Gupta.
Gupta is on the stewardship board for World Economic Forum’s initiative on the future of consumption. The board’s focus at this year’s annual meeting in Davos, Switzerland, was on the future of consumption in India, looking ahead to 2030.
Just look at the country’s gross domestic product, the broadest measure of the goods and services produced in an economy.
India’s economy is likely to grow by 7.4 percent this year, up from 6.7 percent in 2018, according to the International Monetary Fund. By comparison, the IMF says, the global economy, including advanced and emerging economies, is likely to notch just 3.5 percent total expansion this year, down from 3.7 percent in 2018.
India’s GDP for 2018 was $2.85 trillion, making it the world’s fifth-largest economy, after US, China, Japan, and Germany. But, by 2030, India’s GDP is likely to top $9.5 trillion in nominal terms, based on extrapolation of IMF projections.
“What that means is that India will be the third-largest economy in the world, after the U.S. and China,” says Gupta, Michael Dingman Chair in Strategy and Globalization and ranked by Thinkers50 as one of the world’s most influential management thinkers. “It’ll be a striking rise.”
In 2010, Gupta notes, the Indian economy was roughly one-ninth the size of the U.S. economy. By 2030, according to these projections, the Indian economy will be about one-third to one-fourth the size of the U.S. economy. “That is really, really huge,” he says.
Household consumption in India accounts for about 55 percent of GDP — implying that it’ll grow from about $1.6 trillion in 2018 to about $5.5 trillion by 2030. Aside from sheer growth in size, he says, it’s also important to look at the changing nature of that consumption.
Right now, the bulk of India’s consumers are “at the bottom of the pyramid,” he says. They are India’s least-affluent people.
“Over the next 12 years as India’s economy grows by three-to-four times,” he says, “the big bulge will be in the middle of the pyramid, rather than the bottom of the pyramid.”
India’s consumers will also become “a whole lot more connected,” Gupta says, as internet, especially mobile broadband internet, becomes ubiquitous.
What does India’s rise mean for the world’s multinational companies? Strategies developed for other markets, Gupta says, aren’t likely to fit the Indian marketplace.
“India, diverse and heterogeneous as it is right now, will remain a very heterogeneous market, certainly far more heterogeneous than the U.S., perhaps even more heterogeneous than China,” he says. “And therefore India will not be one India from a market point of view, but will be many Indias.”
Multinational companies must build strategies for India “that naturally play to where the puck is moving, not where it is now, both in terms of how to market your product to the connected consumer, and how to leverage all the mobile boom, the ecommerce boom, and the fintech boom in India,” Gupta says.
Companies that succeed in India will likely not enter with one strategy, but multiple, synergistic strategies that adapt for the diverse nature of Indian consumers.
Gupta offers this advice for multinational firms: “If you are in India, deepen your commitment and your market penetration. And, if you are not currently in India, figure out a strategy to be in India. Remember, after China and India, there aren’t a whole lot of big emerging markets left. India’s population as well as GDP are bigger than those of the entire continent of Africa. And, India is growing faster than Africa. So, replacing India as a market opportunity will not be so easy.”
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