In India’s financial and entertainment capital Mumbai, you will probably pay more for a glass of white wine than you would in London, you are quite likely to be driven by a chauffeur to a party, that is likely to be held in a five star hotel, where you will probably hang out with well-dressed Indians who have more disposable income than many of your friends in London.
But when you leave the party, you might also see the families, the homeless and migrant constuction labourers who sleep, live, work and die on the streets. After leaving the air-conditioned glistening offices in Maximum City decked out with high-tech laptops, pool tables, and a gym, you might well walk past stray dogs, piles of rubbish and a huge sprawling slum. Road conditions are not always great and driving habits can be abysmal.
India is a paradox: it is both rich and poor; both a developing economy and an emerging world superpower.
The middle classes in India number more than double the population of the UK – that is more than 160 million.
India is also home to one third of the world’s poor, according to the International Development Association, with more than a third of the population (approx. 410 million Indians) living beneath the poverty line.
However, India’s fast growing middle class is a reason why many companies are trying to grab a slice of the Indian consumer market.
Consumer spending and technological innovation will both drive India’s growth. It is already the world’s fourth largest economy, set to overtake Japan.
A nation of entrepreneurs
India already boasts an enviable entrepreneurial spirit, with 51 per cent of the work force being self-employed.
This compares to the UK where just 14 per cent of the workforce are self-employed.
A roadside stall in India.
There is no doubt the digital revolution has the potential to transform many sectors in India from healthcare to education.
India has the second largest mobile phone user base in the world
India already has the second largest number of mobile phone users in the world, numbering 870 million, after China, which has 1.22 billion mobile phone users.
There are now 205 million Internet users in India, according to the Internet and Mobile Association of India (IAMAI). Of these 110 million are mobile Internet users. India is also home to some of the world’s top software companies.
By next year India will overtake the US as the second largest Internet user base in the world
The IAMAI estimates that by June 2014, India will have 243 million internet users, at which point it is expected to overtake the US as the second largest Internet base in the world, second to China, which has more than 300 million Internet users.
But although India’s growth averaged at 8.5 per cent per year during the period 2004-05 to 2010-11, even reaching growth of 9.3 per cent in 2010 to 2011, Indian rating agency Ratings & Research now expects India’s GDP growth to remain sluggish at 4.9 percent in the current financial year.
Confidence in the Indian economy has faltered
A report by the Pew Research Center in the USA found that public confidence in the Indian economy had faded between 2011 and 2012.
Last month Mumbai slipped six places into the bottom rung on the list of the world’s leading financial centres, the Global Financial Centre Index.
Inflation, rising living costs, a weak rupee, and political paralysis, that is Government inaction on reforms have all slowed growth. India’s ruling Congress Party has also hit the headlines with corruption controversy as well.
This all a far cry from the ‘India Shining’ phrase that was coined in 2004 by the then Indian Government to describe the national optimism and country’s fast economic growth.
But despite a booming economy for several years, wealth has not trickled down to the poor and in 2010 a Multidimensional Poverty Index developed by experts at Oxford University with the UN Development Programme found that there were more poor people in eight states of India than the 26 poorest nations in Africa.
Whilst some Westeners might flock to India for medical tourism, many areas of India severely lack basic healthcare, doctors and hospitals.
Credit rating agency Standard and Poor’s has now threatened to downgrade India’s sovereign credit rating to junk status if steps are not taken to improve economic growth.
Yet there are many reasons to remain excited about India.
A vegetable vendor in India
It is the world’s largest democracy, has a large skilled workforce, English is widely-spoken and is a young country with an average age of 26.
By 2025 India is predicted to have the largest workforce in the world.
India is now the most attractive destination in the world
In fact investors continue to remain very upbeat about India. According to global consulting film EY’s Ninth Global Capital Confidence Barometer, India is now the most attractive investment destination in the world, ahead of China and the US, thanks to the easing of rules on foreign direct investment in India and sharp currency depreciation, which have created a large opportunity for foreign players vying for a greater role in the Indian market. Sectors with the highest level of anticipated deal-making include automotive, technology, life sciences and consumer products, the report says.
The US, France and Japan are the top three investors likely to invest in India, according to these insights gleaned from a survey of 1,600 senior executives across more than 70 countries.
Few would dispute that India has the potential to be Asia’s other superpower; it is how to unlock that potential that is the key question.
Leading thinkers from across the world have attempted to answer this in a series of original essays in McKinsey’s book, Reimagining India: Unlocking the Potential of Asia’s Next Superpower.