McKinsey Asia Chairman Oliver Tonby on India's growth outlook
At the World Economic Forum (WEF) 2020 in Switzerland, McKinsey & Company’s Asia Chairman Oliver Tonby reflected on the economic outlook for India, as well as on the impact of the government's latest policies.
India's economy is regarded as one of the most promising economies of the world, with one analysis predicting that India will become the 2nd economy globally by 2050.
Although economic momentum has cooled off slightly in recent years, Tonby said that he still sees several positive economic conditions that stack up in the country's favour.
“Myself and many of McKinsey's clients and executives that I speak to are also optimistic about India, particularly in the long run. We still have 5-6% growth, a lot of people coming out of poverty into the consuming class, more so than any other country in the world, except China perhaps,” he said to news outlet India Today.
“Technology disruption is helping, because we can leapfrog in multiple sectors, and that is happening in spades in India.” Alongside a solid digital infrastructure, India enjoys a strong talent pool that can cater to the digital future. “If you look at STEM professionals, there are more in India than anywhere else in the world,” he added.
The McKinsey leader further pointed at entrepreneurialism. “India now has more unicorns than Germany, and is one of the countries in the world with most. And by the way, those unicorns are getting to unicorn status faster than any other country in the world.”
Tonby’s analysis is reflective of a number of trends that have been unfolding in India recently. Experts have described India as the next tech startup revolution, with the potential to surpass Silicon Valley in momentum. Consultancy Elixirr illustrated the strength of India’s startup environment last year, pointing to some of the world’s leading venture capital (VC) funds such as Sequoia and Lightspeed, which have been actively establishing a base in India and already raised over $1 billion.
The expansion of the consumer class is also something that has received significant attention recently. At the WEF last year, management consultancy Bain & Company released a report that projected India’s consumer market to reach a value of $6 trillion over the next decade. A number of other firms have backed up these predictions.
As a result, businesses across the globe are keen to invest in India, however, in doing so they face with a number of complexities and challenges. The government has made an attempt last year to create a more business-friendly environment by slashing corporate taxes significantly, although Tonby says that more is required to allay the worries amongst international investors.
“Absolutely, lower taxes and creating a compelling environment for investment is attractive. The ‘but’ is that India is large, complicated and has its own way of working, so many companies are scared about how to operate in India and how to become successful – not just investing but making returns and thriving,” said Tonby.
Asked about these worries, he added, “If you look at some of the issues affecting India, they’re similar to the rest of the world. So environmental sustainability, inequality, and an overall economic slowdown, which has been sharper in India than expected in the last couple of years. This is coupled with geopolitical tension and tensions inside of countries. You get a little bit worried, to be honest.”
McKinsey & Company is one of the strategic partners of the World Economic Forum in Davos.
