Competitiveness: Catching the next wave
The report delves into key sectors that will propel India’s future growth, examine their challenges, growth potential, and future outlook. It also outlines the key policy initiatives, such as emphasis on infrastructure, partnership with businesses, and better center-state coordination, that must be implemented in order to for India to realize its full potential.
Key highlights of the report
- India’s economy promises enormous long-term advantages, such as a young demographic base, growing incomes, an expanding (and globalized) middle class, an educated workforce, and a stable democracy.
- However, in the past few years, the economy has been strained by structural inadequacies and a general lack of consensus in policymaking. It also faces challenges resulting from rapid growth that include poverty alleviation, income distribution, urban planning, and environmental degradation.
- With a new government in place, policy decisions and choices will determine the nature, pace, and success of economic growth going forward. This means identifying sectors that can reap the potential benefits of demographic dividends and tap resources most efficiently.
Next wave of growth – Industry focus
The industries poised to drive India’s growth over the next 30 years include:
Infrastructure and construction
Rapid economic growth and a rising population have placed immense pressure on India’s infrastructure. With the government’s three-pronged strategy aimed at modifying the regulatory framework, removing bottlenecks for existing projects, and reviving the capital-expenditure cycle, India could lead growth among emerging economies in the infrastructure and construction sector. It is expected to become the world’s third-largest construction market by 2025.
Banking, financial services and insurance (BFSI)
Despite the fact that more than 40 percent of Indian households currently do not have access to banking services, the government’s targeted strategy to promote financial inclusion in India, along with the country’s rising middle class, will likely continue to propel demand for banking and savings accounts, as well as services such as asset management and insurance products. Rural India, along with the urban lower-middle class, is arguably the sector’s next big opportunity.
Wholesale and retail
The advent of organized retail (licensed retailers such as corporate-backed supermarkets and retail chains), coupled with a young population, rising incomes, and growing urbanization, has redefined the retail experience in India. The segregated market, including wholesale, multibrand, single brand, and online retail, along with neighborhood “mom-and-pop” stores, will put pressure on retailers to innovate to compete. Rising incomes, a growing middle class, and the urbanization and the proliferation of nuclear families will continue to strengthen this sector, playing a prominent role in India’s future growth.
The rising cost of automobile ownership, driven by high fuel prices and interest rates, has impacted consumer demand in India in recent years. However, younger demographics, low labor costs, and a plentiful supply of engineers are capable of turning India into a global hub for auto manufacturing as customers around the world become more cost-conscious. A stable government over the next five years will be a crucial factor in improving investment sentiments and attracting global automobile manufacturers to establish factories and R&D centers in India.
Low investment and poor health infrastructure in India have traditionally restrained the growth of this sector. However, the changing profile of health problems, rise in early detection of acute diseases, and increasing availability of treatment facilities have boosted the demand for drugs, as well as the need for health care diagnostic facilities in the metropolitan areas due to a rising middle class. And though a large proportion of the rural market still remains untapped, it represents a huge growth opportunity for pharmaceutical companies. The Indian pharmaceutical industry is projected to surpass other leading emerging economies in the 21st century as a global center for end-to-end drug discovery and innovation.
Information and communication technology (ICT)
India currently has the world’s second-largest mobile subscriber base (900 million) and the third-highest Internet subscriber base. As the economy expands, IT spending by both businesses and consumers is likely to increase. This will aid the wider ICT sector, which will also benefit from greater penetration of computing technology, smartphones, and the Internet in both urban and rural areas.
The important role of the government and policymakers in India’s success story is reiterated throughout the report. Their actions and influence, working in conjunction with business, are crucial in helping India on its path to prosperity.
Skills and talent development
India must focus on skills-building that is consistent with the demands of the marketplace, as well as responsive to the aspirations of its youth. New models of investment support from government and industry are needed to deliver this skills training, along with financing schemes for students to ensure affordability. In addition, development opportunities must be accessible to youth from all regions of the country, as well as all levels of education (to include school and college dropouts).
Trade, regulation, and innovation
The increasingly integrated global economy has prompted multinational firms to look to compete more intensively in the Indian market. For India to realize its full potential as a leading G20 economy, it must continue to open and internationalize its markets. Furthermore, government support of fostering an environment of innovation and collaboration across borders is critical for India’s economic growth. Regulatory policies that continue the opening of labor markets is important for achieving sustainable innovations and improving national challenges.