Brands must target India

05 April 2011

NEW DELHI: Brand owners in sectors from digital media to consumer healthcare could gain substantial benefits by enhancing their position in India, McKinsey has argued.

The consultancy predicted that over the next 20 years, the number of shoppers living in India's cities will hit 590m, with this group accounting for 70% of national GDP, and generating 120m new jobs.

Income levels are also expected to triple, helping 290m individuals out of poverty, while an additional 270m people enter the workforce, forming part of the world's biggest workforce.

"As a consequence, India will materially affect the global demand for, and supply of, goods and services," the study said.

"In an increasingly competitive market, there will be substantial value created by those who make thoughtful design and execution choices on 'where to compete' in specific segments, products and local distribution."

Across a broad variety of categories, India should deliver 15% of growth in the coming decade, yielding major possibilities for domestic and international operators.

"Industries such as food, media, personal transport, financial services and pharmaceuticals will see a rise in demand in what will be the world's fifth largest consumer market," McKinsey's report said.

The consumer healthcare sphere is projected to expand 500% by 2020, when premium offerings reach 10m homes, and urbanisation fuels a preference for environmentally-friendly cars and motorbikes.

Innovation is another key driver of the country's ascension, with the requirement of fostering business models combining low-cost but high-value goods and services.

McKinsey cited the example of unique identity cards and digital technologies achieving greater penetration in rural regions, meaning microfinance and parallel schemes can advance their prospects.

Several companies have also already built appliances like fridges and water purifiers which meet the distinct needs of customers in these areas, who often have intermittent access to electricity.

Similar opportunities exist regarding low-cost housing, while General Electric has manufactured a portable electrocardiogram in reflection of India's bespoke circumstances.

New products in India can also then be extended to extra emerging markets, where spending among the middle class is forecast to rise from $7tr to $20tr worldwide between 2010 and 2022.

Elsewhere, although only 7% of India's population is currently connected to the web, they dedicate an average of 4.5 hours a day to consuming offline digital content, now worth over $4bn.

As the internet user base grows to 450m people in 2015, the value of this activity is anticipated to scale $20bn (€14.1bn; £12.4bn).

Productivity forms a further primary strength for India, as many mature countries face a skills shortage, and thus look to India as a pool of comparatively cheap, but increasingly expert, knowledge.

This applies in categories like health, IT and business services, as costs can be 20% to 30% lower than in the US and Western Europe.

In a related shift, India is becoming a leading source of talent, with the biggest English-speaking population in the world, and half of its residents falling under 25 years old.

Backed by the right support, these trends hold the promise of driving traditional markets such as education to "sunrise sectors" including green tech, online services and clinical research.

"In addition, they could provide the right solutions for developed economies with greying populations," McKinsey added.

Data sourced from McKinsey; additional content by Warc staff