Market Opportunities On India
25 years ago, India embarked on a journey of economic liberalization, opening its doors to globalization and market forces. We, and the rest of the world, have watched as the investment and trade regime introduced in 1991 raised economic growth, increased consumer choice, and reduced poverty significantly.
Now, as uncertainties cloud the global economic picture, the International Monetary Fund has projected that India’s GDP will grow by 7.4 percent for 2016–17, making it the world’s fastest-growing large economy. India also compares favorably with other emerging markets in growth potential. (Exhibit 1). The country offers an attractive long-term future powered largely by a consuming class that’s expected to more than triple, to 89 million households, by 2025.
Liberalization has created new opportunities. The challenge for policy makers is to manage growth so that it creates the basis for sustainable economic performance. Although much work has been done, India’s transformation into a global economic force has yet to fully benefit all its citizens. There’s a massive unmet need for basic services, such as water and sanitation, energy, and health care, for example, while red tape makes it hard to do business. The government has begun to address many of these challenges, and the pace of change could accelerate in coming years as some initiatives gain scale.
From our vantage point, India has an exciting future. In the new McKinsey Global Institute report India’s ascent: Five opportunities for growth and transformation, we look at game-changing opportunities for the country’s economy and the implications for domestic businesses, multinational companies, and the government. The five areas we focus on by no means provide a comprehensive assessment of India’s prospects, but we believe they are among the most significant trends. Foreign and Indian businesses would do well to recognize these opportunities and reflect on how to exploit them.
Market Opportunities On India
The following export product groups categorize the highest dollar value in Indian global shipments during 2019. Also shown is the percentage share each export category represents in terms of overall exports from India.
- Mineral fuels including oil: US$44.1 billion (13.7% of total exports)
- Gems, precious metals: $36.7 billion (11.4%)
- Machinery including computers: $21.2 billion (6.6%)
- Organic chemicals: $18.3 billion (5.7%)
- Vehicles: $17.2 billion (5.3%)
- Pharmaceuticals: $16.1 billion (5%)
- Electrical machinery, equipment: $14.7 billion (4.5%)
- Iron, steel: $9.7 billion (3%)
- Clothing, accessories (not knit or crochet): $8.6 billion (2.7%)
- Knit or crochet clothing, accessories: $7.9 billion (2.5%)
India’s top 10 exports accounted for roughly three-fifths (60.2%) of the overall value of its global shipments.
Electrical machinery and equipment represents the fastest growing among the top 10 export categories, up 23.6% from 2018 to 2019. In second place for improving Indian export sales were pharmaceuticals which gained 12.5%. India’s shipments of unknitted and non-crocheted clothing or accessories recorded the third-fastest gain in value due to a 6.4% increase year over year.
There were three declining top categories for Indian exports: gems and precious metals via its -8.7% drop mainly due to India’s plummeting international sales of diamonds, coins and precious metal scrap; vehicles (down -6%); then iron and steel (down -3.1%).
Note that the results listed above are at the categorized two-digit Harmonized Tariff System (HTS) code level. For a more granular view of exported goods at the four-digit HTS code level, see the section Searchable List of India’s Most Valuable Export Products further down near the bottom of this article.
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