Five areas that could have an impact on India’s economy

From sustainable urbanization to unlocking the potential of women, new research by McKinsey Global highlights India’s opportunities and challenges


A report by McKinsey Global Institute says India has been able to improve living standards since liberalization, but there is more left to do. Photo: Priyanka Parashar/Mint
A report by McKinsey Global Institute says India has been able to improve living standards since liberalization, but there is more left to do. Photo: Priyanka Parashar/Mint

Acceptable living standards, sustainable urbanization, manufacturing, digital technology and unlocking the potential of women are five areas that could have an economic impact on India, according to a research paper released by McKinsey Global Institute.

The paper titled India’s ascent: Five opportunities for growth and transformation says that this will require leaders at all levels—local, state and national—to adopt new approaches to governance and provision of services.

The paper, which comes on the 25th anniversary of India’s economic liberalization, says that government agencies must “ramp up their capabilities to meet the enormous challenge”.

“It (India) offers attractive long-term potential, powered largely by a consuming class that we expect will more than triple, to 89 million households, by 2025. The challenge for Indian policy makers is to manage growth in such a way that it creates the basis for sustainable economic performance. India’s transformation into a global economic force has yet to fully benefit all Indians,” the report says.

The report says that while India has been able to improve the living standards since economic liberalization, there is a long way to go.

“To achieve its full potential, the country will need to address deprivation using a new set of parameters that address quality of life and access to basic services. This is certainly within India’s capacity, but it will require policy makers to promote an agenda that emphasizes job creation, growth-oriented investment, farm-sector productivity, and innovative social programmes so that the benefits actually reach the people who need them,” the report says.

The private sector can have a role in “job creation and providing effective basic services”.

It points out that women need to play a more crucial role in India’s economy. This is despite the central government introducing schemes such as Beti Bachao Beti Padhao.

Women are under-represented in India’s economy. McKinsey Global estimates that, at 17%, India’s women have the lowest share of contribution to gross domestic product (GDP) in the world, lower than women in China (41%), Sub-Saharan Africa (39%), and Latin America (33%). Women in India make up just 24% of the workforce, compared with 40% globally, the report said.

Minister of state for urban development Rao Inderjit Singh, in a reply in the Lok Sabha last month, had said urbanization is increasing dramatically and that about 60% of India’s population will live in cities by 2050.

The report says that to achieve sustainable growth, cities will have to focus on livable spaces, clean air and water.

It says that the central government, recognizing the problem and the potential, has announced a range of schemes including the smart cities mission and the Atal Mission for Rejuvenation and Urban Transformation, or Amrut. It also points out that initiatives like Make in India and Digital India have brought new beginnings to the manufacturing and digital sector.

“Manufacturers in India are innovating to build competitive businesses and tap the large and growing local market. Reforms and public investment in infrastructure could make it easier for all types of manufacturing businesses—foreign and Indian—to achieve scale and efficiency,” the report says.

“To capture the full potential of technology, India will need to bridge the urban-rural digital divide by addressing barriers such as limited telecom infrastructure, slow Internet speed, and low computer literacy,” the report says.

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