India's public sector increasingly turning to management consultants

19 July 2019 3 min. read

Spending on external consultants by India’s public sector has grown strongly in the past five years. Against a backdrop of major need for reform, change and digitisation, the government’s appetite for external consulting services is significantly on the rise, finds new data form Euromonitor.

As India’s economy rapidly expands to occupy an increasingly central position in the global economy, the dynamism in the market is boosting business for the consulting sector. India’s business and management consulting market is substantial in its scale, and appears to be growing steadily.

According to data sourced from research firm Euromonitor, India’s management consulting market was worth Rs4.5tn ($64.8 billion) last year, having enjoyed an average growth of 10.8% annually in the five years to 2018. While the bulk of the fee income is earned in the private sector, the share of public sector spending has increased notably.

India’s government has been working actively to ensure that India’s position vis-à-vis the global economy only grows more essential, primarily through a number of targeted initiatives to cover crucial gaps in the national economy. Experts and market watchers have identified certain areas where India’s economy needs improvement on an immediate basis.

Public sector use of consultants in India

For one, the country’s manufacturing sector is relatively low-profile, causing a major hindrance to its economic sustainability and export capacities. Other criticisms include a low ranking on the ease of doing business index, which is a result of rampant inefficiencies in various portions of the established infrastructure.

The government has embarked on several missions to actively tackle these issues. Some of the most prominent examples of these efforts include Make in India, Digital India, the Goods & Services Tax and the Smart Cities initiative, among several others. The consulting sector has been an integral part of these efforts.

In 2017, the central government’s planning agency – the NITI Aayog – announced that it would enlist the services of the Boston Consulting Group, EY and McKinsey & Company to support with time-bound projects that come under the ambit of various centrally sponsored schemes.

With their rapidly growing capabilities in the Industry 4.0 domain, a number of consultancies have also been supporting with the setting up of Smart Cities across the country. At a State Government level, McKinsey & Company has been working with the Andhra Pradesh administration to develop the state’s new capital city of Amravati.

A number of public sector institutions outside of government agencies have also been enlisting consulting services. The State Bank of India, for instance, is currently working with EY to solve the financial crisis at Jet Airways, while EY has also been working on the divestment of public sector airline carrier Air India.