India 2025: A nation of cities

THE CHALLENGE is for India to meet massive unmet needs for basic services – water, sanitation, energy, healthcare — and to address the red tape that makes it hard to do business . . .

BY 2025, INDIA will have 29 cities each with a population of more than one million. Economic growth will centre in them, and the biggest infrastructure building will take place there. The output of Indian cities will come to resemble that of cities in middle-
income nations.
By 2030, for example, Mumbai’s economy, a mammoth market of US$245 billion in consumption, will be bigger than the whole of Malaysia’s today. The next four cities by market size will each have an annual consumption of between US$80 billion and US$175 billion.
These are among key findings of a McKinsey Global Institute report, authored by Noshir Kaka and Anu Madgavkar.
They say liberalisation in India has created new opportunities. The challenge for policymakers 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 of its citizens,” the report says.
“There is a massive unmet need for basic services, such as water and sanitation, energy and health care, while red tape makes it hard to do business.” But “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”.
The report says India offers an attractive long-term future powered largely by a consuming class that is expected to more than triple, to 89 million households, by 2025. It identifies five opportunities for growth and transformation of the Indian economy. These are:
n Acceptable living standards for all — “The official poverty rate declined from 45% of the population in 1994 to 22% in 2012, but this statistic defines only the most dismal situations.
“By our broader measure of minimum acceptable living standards — spanning nutrition, water, sanitation, energy, housing, education and healthcare, we find that 56% of Indians lacked the basics in 2012.
“Policymakers will have to promote an agenda emphasising job creation, growth-oriented investment, farm-sector productivity, and innovative social programmes that help the people who actually need them. The private sector has a substantial role to play, both in creating and providing effective basic services.”

n Sustainable urbanisation —
“(India’s) major cities will have to become more liveable places, offering clean air and water, reliable utilities and extensive green spaces. India’s urban transformation represents a huge opportunity for domestic and international businesses that can provide capital, technology and planning know-how, as well as goods and services that urban consumers demand.”

n Manufacturing for India, in India — “India’s appeal to potential investors will be more than just its low-cost labour: manufacturers there are building competitive businesses to tap into the large and growing local market.
“Further reforms and public infrastructure investments could make it easier for all types of manufacturing businesses — foreign and Indian alike – to achieve scale and efficiency.”

n Riding the digital wave – “Twelve powerful technologies will benefit India, helping to raise productivity, improving efficiency across major sectors of the economy, and radically altering the provision of services, such as education and healthcare. These technologies could add US$550 billion to US$1 trillion a year of economic value in 2025, potentially creating millions of well-paying, productive jobs (including positions for people with moderate levels of formal education).”

n Unlocking the potential of Indian women — “Our research suggests that women now contribute only 17% of India’s GDP and make up just 24% of the workforce, compared with 40% globally. In the coming decade, they will represent one of the largest potential economic forces in the country.”
The report says there is potential through women workers to add US$700 billion to India’s GDP in 2025. “Movement towards closing the gender gap in education in education and in financial and digital inclusion has begun, but there is scope for further progress.”
Realisation of India’s promise will require
national, State and local leaders to adopt new approaches to governance and the provision of services. These officials will also need new
capabilities, including private sector-style
procurement and supply chain expertise, deep technical skills in planning portfolios of infrastructure investments, and strong project-
management capabilities to ensure that large capital projects finish on time and on budget.
“Training will be needed to help staff
members use digital technologies to automate and re-engineer processes, manage big data and advanced analytics, and improve interaction among citizens through digitised touchpoints, online-access platforms, portals, and messaging and payment platforms.”
www.mckinsey.com/global