What does the future hold for India? (2024)

A woman from India stands tall and proud in a vibrant saree, her yellow veil fluttering in the wind against a backdrop of a clear blue sky.

India is a place of superlatives. It’s home to the world’s fifth-largest economy. Its population, at over 1.4 billion people, has surpassed China’s to become the largest in the world. And that population is young: at a median age of 27.6, Indians are on average more than ten years younger than the citizens of most other major economies.

In 2024, India also held the world’s largest democratic elections, in which 642 million people cast their ballots. Now that a new national government has been sworn in for a five-year term, its leaders have renewed their commitment to several economic goals. The government is expected to unveil its specific plans in July as part of its annual budget, including the following:

• achieving 8 percent GDP growth each year in the next decade and growing India’s GDP to $19 trillion by 2047
• creating 90 million jobs by 2030 and 600 million jobs by 2047
• investing about $600 billion annually to transition to a net-zero world by 2050
• raising income sixfold to over $12,000 per capita

Achieving these goals will require consistent, concerted effort and focus from a wide variety of stakeholders. In this Explainer, we examine several of these goals and explore how specific industries can help achieve them.

Read more McKinsey India insights.

How could India bolster economic inclusion?

According to McKinsey analysis, more than half the population of G-20 countries—about 2.6 billion people—live below what’s called the line of economic empowerment. That means they don’t have enough money to meet the full range of essential needs and begin attaining economic security.

Seventy-seven percent of India’s population—over a billion people—live below this economic-empowerment line. That’s the largest empowerment gap of any G-20 nation. These people may be subsistence farmers who live far from the nearest medical clinic, without access to digital networks or even clean drinking water. Low-income urban residents may live in slums or tenements. Those who are better off financially may still lack the means to meet their basic needs: for example, these people may live in rural areas with entrenched poverty and few job opportunities, or they may be forced to live in small, crowded apartment buildings in unsafe urban neighborhoods, with little privacy and few quiet spots for children to study.

In India, as with other G-20 economies, economic growth and business innovations will be critical to future economic inclusion; in fact, these levers could erase more than 90 percent of the empowerment gap. To put that in human terms, accelerated economic growth and business-led innovation alone could lift about 700 million peopleabove the threshold by 2030.

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How could Indian companies achieve extraordinary growth?

The private sector will be a crucial partner in helping India achieve the growth needed to bolster economic inclusion. McKinsey analyzed the performance of over 800 publicly traded Indian companies between 2012 and 2022. One in fivecompanies was able to double its revenue every five years and quadruple it in ten. This growth rate is more than two and a half times the GDP growth rate during the same period—and can act as a catalyst for GDP growth more generally.

How could other Indian companies achieve this level of growth? Here are three elements organizations can consider to accelerate the development of their core businesses:

• Unleash the full potential of digital and data. Digital transformationsare a common accelerator of companies with extraordinary growth. Data and AI can streamline processes and enhance capabilities across the board, including pricing, marketing, and decision making.
• Reallocate resources with agility. Companies that expand by maintaining or increasing their exposure to fast-growing, profitable segments can outperform their peers. And organizations facing market headwinds may need to aggressively reallocate their resources. High-growth companies often assess reallocation opportunities with a microscopic view rather than a macro lens.
• Invest in the next line of leaders. Empowering leadership throughout the organization can enhance operational efficiency, as top executives are better able to focus on propelling the organization toward innovation and growth. McKinsey has found that investing in culture and leadership can contribute to an improvement in overall organizational health and performance within as little as six months.

High-growth companies often look beyond their core businesses, transferring skills acquired in one field to others. Here are four essential growth factors:

• pursuing adjacent opportunities by using existing assets and capabilities
• creating new breakout businesses to achieve growth via disruptive innovation and new-business categories
• building new export markets worldwide
• engaging in strategic mergers and acquisitions to help build organizational capabilities and best practices

Read more McKinsey India insights.

What role could India play in achieving net zero?

At COP26in 2021, India announced its ambition to become a net-zero emitter by 2070. India is the third-largest emitter globally, emitting a net total of 2.9 gigatons of carbon dioxide equivalent (GtCO₂e) every year as of 2019. About 70 percentof these emissions are from six sectors: power, steel, automotive, aviation, cement, and agriculture.

Achieving net zero will be a big lift in India, as it will be in the rest of the world. McKinsey analysis shows that the benefits of a well-planned, orderly, and accelerated transition could outweigh the downsides, given India’s growth outlook.

McKinsey has isolated four cross-cutting decarbonization opportunities in India:

• Green hydrogen. Hydrogen is a versatile energy source. It’s derived from water and has no greenhouse gas emissions. Adoption of green hydrogen could enable an annual abatement of 900 megatonsof carbon dioxide equivalent (MtCO₂e) by 2050. But this depends on the evolution of green hydrogen’s cost competitiveness. At present, green hydrogen is relatively expensive to produce, but production costs are expected to fall by approximately 50 percentby 2030. Costs can be reduced by accelerating R&D, adopting cutting-edge technologies, and ensuring early demand. Hydrogen business building is already under wayin India: the energy group Reliance announced an investment of $75 billion for renewables infrastructure, with the intention to first produce cheap blue hydrogen and then transition to green hydrogen.
• Carbon capture, utilization, and storage (CCUS). Adoption and scaling of new CCUS technologies could help reduce industrial emissions further, particularly for hard-to-abate sectors like cement, oil and gas, and chemicals. CCUS could help capture 11.4 GtCO2eacross these sectors cumulatively by 2070. A hub model for CCUS—or centralized infrastructure to connect multiple carbon capture facilities, transportation systems, and storage sites—could increase efficiency further.
• Natural climate solutions (NCS). NCS are conservation, restoration, and land management actions that can either prevent emissions or remove carbon dioxidefrom the atmosphere. In an accelerated scenario, India’s natural resources can sequester 640 MtCO2eannually by 2050. Nearly 85 percent of sequestration would come from forests (avoiding deforestation and pursuing reforestation), agroforestry (trees in cropland and regenerative agriculture), and urban tree planting.
• Material circularity. India currently generates 750 million to 800 million tons of waste across waste streams, with recycling rates of 13 percent for nonagricultural waste streams. If recycling rates improved to 80 percent, there would be a significant increase in recycled raw materials, which could help abate up to 34 MtCO2eby 2070. Recycled raw materials help reduce emissions by between 50 and 95 percent in the production of steel, cement, plastic, aluminum, and other materials. Material circularity would require investment in recycling infrastructure, as well as enforcement of waste management and extended-producer-responsibility regulations.

What role could innovation play in India’s future?

The sheer scale of India’s economy—and the scale of the challenges it faces—means that innovation in any sector stands to have a huge impact. Technological innovation has a major role to play in accelerating equality. “For a country of our size, and with our kind of population and geography, we will never attain financial inclusion without very strong technology backing,” says Arundhati Bhattacharya, CEO of Salesforce India and former chair of the State Bank of India.

Entrepreneurial Indian businesspeople are developing solutions. Nandan Nilekanicofounded the Indian IT giant Infosys and served as its coexecutive chair until 2009, at which point he joined the Indian government to develop population-scale, open-source innovations. Beginning in 2010, he led the rollout of a digital identity card called Aadhaar, named for the Hindi word for “foundation.” Aadhaar is the world’s largest biometric program, enabling previously unbanked people to open accounts and gain financial inclusion at very low or no cost. As of 2022, 1.3 billion people had an Aadhaar ID.

Another financial innovation Nilekani has been involved in is the account aggregator network, which allows individuals to use their own digital trails to get access to credit or personal finance. Small businesses can also use it to obtain working capital. This can help democratize and transform finance in India, says Nilekani.

Innovation can also play a role in the agriculture industry. Flourishing agriculture could boost the economy and significantly improve farmers’ livelihoods and income. By 2030, McKinsey estimates that agriculture could contribute about $600 billion to India’s GDP. Agricultural technology, or agtech, is essential to powering India’s farming transformation. Existing agricultural companies are using digital technologies in the following ways:

• Farm supply providers are using technology to create direct-to-farmer sales channels to bypass intermediaries.
• Financial-services providers are using technology to better understand farmers, provide targeted products, and reduce loan risks.
• Agricultural product procurement, processing, and sales firms have started to integrate backward into the supply chain and create market linkages for the farmer.

As investors, agtech companies, and government agricultural actors continue to innovate, collaboration will be critical. The better they know each other, the better the products they will be able to develop. Ultimately, the agtech ecosystem has the potential to increase Indian farmers’ incomes by up to 35 percent.

Read more McKinsey India insights.

How could the Indian banking sector build resilience?

Banks worldwide had a strong year in 2022 but a difficult one in 2023. The growth and profitability of global banking will likely face continuing challenges, given a muted economic-growth outlook and continuing geopolitical tensions.

It’s a different story in India, where banks have withstood interest rate and macroeconomic volatility and provided strong financial returns—and outperformed their global peers on growth and profitability. But for the modern financial institution, strong returns alone won’t guarantee smooth sailing through uncertain waters ahead. To strengthen their defenses and build resilience, Indian banks could engage a broader network of stakeholders, take a broader view of impact, and assess performance more holistically. Here are some essential dimensions for improvement:

• Financial performance. Indian banks have led with healthy credit growth of about 10 percentover the past decade. Higher returns on assets than those of global peers have resulted in a valuation premium. To further improve financial performance, Indian banks could build capabilities for digital infrastructure and to serve growing mid- and mass-affluent segments. They can also double down on AI, incorporating generative AI and machine learning into their decisions.
• Industry health. Consolidation across public sector banks in recent years has yielded larger, healthier institutions—and greater competition. To outperform in this new climate, banks could focus on building new partnerships, including with fintechs. They could also scale up co-lending partnerships to participate in a national framework intended to promote lending and credit flow to underserved segments of the population. More of these types of partnershipscan help banks extend beyond traditional channels, deepen engagement, and reduce operating costs.
• Customer experience. Customer centricity has improved, with banks offering new digital journeys and super apps to help maintain their leadership positions against challenges from fintechs and major tech companies. But Indian banks have yet to create frictionless processes across onboarding, underwriting, and servicing touchpoints. There are two major opportunitiesfor growth: increased personalization, as well as better digital and analytics-led data collection to provide a more uniform customer experience.
• Societal and environmental responsibilities. Banks in India have played a crucial role in propelling economic inclusionthrough microfinance and business correspondent coverage (which provides banking and other financial services to underserved or remote areas where bank branches aren’t accessible). They could continue these efforts by serving growing, rural credit demand (rural credit demand has grown by more than 10 percent over the past few years). Environmentally, most banks have yet to lay down strategies for achieving net zero. A significant gap of 75 percentexists between India’s need for climate finance and its current supply. Banks have the chance to become the first movers in important areas of the climate finance agenda, via partnerships and go-to-market models for frontier industries.
• Operational resilience. Indian banks can addressoperational resilience by focusing on tech infrastructure, cybersecurity, data management, and talent management practices to improve operating environments. Banks can also revamp employee value propositions—addressing record-high attrition rates—by empowering employee collaboration, encouraging mentorship, improving work environments, and, yes, reviewing compensation. “A word of appreciation in a group or telling someone that you are grateful for the way things are being done can sometimes be far more valuableto a person than just money and stocks,” says Salesforce’s Bhattacharya.

How is IT evolving in India?

India has been a global IT center for decades. Infosys’s Nilekani says it’s a particularly exciting timefor the industry: “It took 30 years for it to become a $100 billion industry in revenue. The next $100 billion came in ten years. The third $100 billion will come in three to four years.” This acceleration, he says, is due in part to the pandemic, which caused an increase in tech spending all over the world. In India, it will propel economic growth and job creation.

One big area of potential? Software as a service (SaaS). As of 2021, over a thousand Indian SaaS companies were bringing in $2.6 billionin revenue. That’s expected to increase to as much as $70 billion by 2030. Bangalore and Chennai are already SaaS hubs, but increasingly SaaS companies are scaling in smaller cities as well. This growth is caused by a few major factors: for one thing, India is unique in the global market in that companies can complete an entire initial go-to-market move there. This is a major advantage in a sector wherein the biggest constraining factor is how rapidly you can induce growth.

Another major factor is India’s massive talent pool. As of 2021, there were over three million developersin India alone. This talent pool is itself a big market for infrastructure tools, which represent about 40 percent of the overall SaaS market.

Freshworks, the India-born SaaS firm that now trades on the Nasdaq, is an example of what Indian enterprises can accomplish. In about ten years, Freshworks reached $300 million in revenue, working from a model of selling and going to market primarily from India.

Read more McKinsey India insights.

What is India’s role in global healthcare?

During the COVID-19 pandemic, India’s healthcare and pharmaceutical companies supplied medicine to nearly 160 countries. This response to urgent demand highlighted India’s healthcare sector and its capabilities.

For one thing, India’s healthcare sector can produce drugs and medical devices inexpensively and at scale. Medical science is moving toward cutting-edge treatments like gene therapy, cell therapy, and CAR T-cell therapy that target specific or rare diseases. Indian talent, manufacturing capabilities, and equipment could significantly lower the costof these therapies, potentially making them available to a much wider market.

Another opportunity lies in clinical development. India is home to a large population of patients who have not previously received any treatments and are therefore eligible for clinical-trial procedures. There’s also a robust hospital network and clear regulatory pathways for clinical development.

India’s competitive landscape gives pharmaceutical companies looking to graduate to the international sphere something of a baptism by fire. “The economics of competing in India,” says G. V. Prasad, cochair and managing director of India-based pharma multinational Dr. Reddy’s Laboratories, “builds a lot of muscle in an organization, which makes it very competitive in the global arena. To that extent, I think Indian companies have demonstrated that they can be as competitive as anybody in the world.”

For a more in-depth exploration of these topics, see McKinsey’s insights on India. And check out India-based job opportunities if you’re interested in working at McKinsey.

Articles referenced include:

• “Achieving extraordinary growth: Myths and realities,” February 19, 2024, Jaidit Brar, Raunak Shah, and Shivanand Sinha
• “Why the next decade in healthcare is India’s decade,” December 12, 2023, Gautam Kumra
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