Identifying India’s high potential

IndiaUnderstanding India’s economic geography is crucial for companies looking to maximise growth opportunities in the country, says McKinsey & Company.

But to make the most of it, particularly if Australia finalises a free trade agreement with India, companies must identify growth opportunities at a granular level by pinpointing growth drivers and high-potential markets.

In a paper entitled India’s economic geography in 2025: States, clusters and cities, McKinsey focuses on distinct geographic opportunity at each level of granularity and finds that India’s 29 states and seven union territories are at different stages of demographic and economic evolution.

Classifying these into four broad groups based on their relative 2012 per capita GDP, it found that eight high-performing states will account for 52 per cent of India’s incremental GDP growth from 2012 to 2025.

Along with four very high-performing city-states, these eight will have 57 per cent of India’s consuming-class households in 2025.

McKinsey adds that rapid urbanisation and the associated income growth will propel the high-performing states to per capita income levels similar to those of today’s middle-income nations. In 2025, for instance, Maharashtra’s 128 million residents will have a purchasing power parity similar to Brazil’s today.

The study also examines India’s metropolitan clusters and finds that 49 out of 183 districts will account for about 77 per cent of India’s incremental GDP, 72 per cent of its consuming-class households, and 73 per cent of its income pool from 2012 to 2025.

Within the urban areas, the report focuses on the top 100 cities, distinguishing between metropolitan areas and others in this group. For example, in 2012 India had 54 metropolitan cities, which together with their hinterlands (65 districts) accounted for 40 per cent of GDP and 45 per cent of consuming-class households.

Full details can be found here.