Davos 2023 | India at the cusp of a new era, remains a bright spot, says McKinsey

Rajat Dhawan, Managing Partner of India at McKinsey, believes that India is at the cusp of a new era and remains a bright spot in the world. Echoing the same sentiments, Gautam Kumra, Chairman of Asia at McKinsey, also highlighted that India, Indonesia, and Vietnam are bright spots in Asia.

Kumra added that despite the challenges posed by headwinds, there are enough tailwinds in the region to overcome them.

One area where India particularly shines is in digital consumption. According to Dhawan, digital consumption in India is expected to be a trillion-dollar opportunity by 2030.

Dhawan said three forced are very unique to India:

Demographics:

The income demographics in the next 2-3 decades are going to be very favourable and which will lead to tremendous amount of domestic consumption.

Digitisation: Digital consumption could be a trillion dollar opportunity by 2030.

Distinctive entrepreneurship culture: There are great ambitions by the promoter class and that is where the decisiveness is coming, he said.

However, India also has its fair share of challenges, particularly in its labour market. Kumra noted that inefficiency in the labour market is a cost disadvantage for India.

“There is competition among countries going on at this time. The tailwinds certainly support many markets in Asia, but Vietnam has done a great job of creating the right ecosystem and creating a right compelling cost and reliable supply chain infrastructure to deliver on global requirements. So that is where India has to catch-up. In terms of cost competitiveness, India has a 10-15 percent disadvantage due to the high cost of energy, the logistics cost and some of the inefficiencies in the labour market,” Kumra added.

Despite this, both Dhawan and Kumra are excited about the government's recently-launched production-linked incentive (PLI) schemes. These schemes aim to boost domestic manufacturing and are expected to attract significant investment to the country. Overall, India's potential for growth and development is undeniable, and the country continues to be a bright spot on the world stage.