Seven trends defining India’s growth story

In the last one week, I’ve come across some very interesting research – some slightly dated, the majority quite recent.  Yet, each of these individual threads, coincidentally, supports the other.  What does the emerging tapestry reveal?

1. The undisputable re-emergence of Asia, specifically China and India (see Angus Maddison, Hans Rosling, McKinsey, International Monetary Fund).  China’s recent eclipsing of Japan to gain recognition as the world’s second largest economy is par for the course as is increased intra-regional trade.

2. Increasing domestic prosperity 

• For the first time ever, the number of high-income households in India has exceeded the number of low-income ones (reference NCAER);
• Sales of trucks and buses — an indicator of economic activity — rose 37 per cent to 51,481 units in July 2010;
• Overall automobile sales grew at 31.50 per cent to 1,237,461 units in July 2010; and
• Mobile penetration is projected to reach 55.9 percent in 2010, increasing to 72.5 percent in 2012. 

3.  India’s growing engagement with the world

• Expanding share of world trade - 2.8% in 2009 compared to 0.6% in 1998
• Foreign direct investment (FDI) flows increasing steadily

4.  Heightened business focus; less emotional baggage

• India Inc's merger and acquisitions have touched nearly US$ 50 billion level over January-July 2010, over three times the total in 2009. 
• Strategic rationale driving corporate expansion (Fortis, Piramal Healthcare)
• Robust succession planning process (Tata Sons, Larsen and Toubro, Infosys)

5.  An aspirational, entrepreneurial, young talent pool

• 72 % of India's population is below the age of 40, 47% of Indians are under the age of 20 and 10% of the world population is an Indian under 25
• According to Goldman Sachs, India will add 110 mn people to global workforce by 2020.
• The Indian Government plans to increase the gross enrolment ratio from the current 12.4% to 30% by 2020 and further up to 40% by 2025. 

6.  Increasingly pervasive influence of technology and media

• Reverse / low-cost innovation – Tata, GE, Nokia leading the way
• The media and entertainment sector is estimated to be growing at a compounded annual growth rate of 13 per cent over the next few years; rollout of 3G by the private sector over the next few months is expected to be a game-changer for business and society.

7.  Growing economic maturity and self-confidence

• India has become the fifth country to have a unique symbol (`) for its currency
• Foreign exchange reserves total US$ 284 billion
• Is forging its own set of strategic partnerships – USA, Singapore, Myanmar, Africa, Afghanistan - to name a few.

In sum, the tapestry presents much potential.  Yet, as anyone remotely familiar with India knows, it is far from being an easy market to do business with.  Any truthful case study of an international company doing business with India is peppered with anecdotes about how they have had to revise their India strategy.  Poor governance and infrastructure remain areas of concern.  

But then again, if India were an economist’s ‘perfect’ market, it wouldn’t be witnessing the extraordinary growth rates it has.