Indian cities have great potential for brands

03 May 2010

NEW DELHI: The "unprecedented" growth of India's cities in the next two decades will offer great potential for marketers, a study by the McKinsey Global Institute has shown.

India's primary advantages were said to include its comparatively young and rapidly-growing population, as well as its consistent economic growth, which has given many consumers "rich opportunities".

From 2001 to 2008, the number of people living in India's biggest cities rose from 290 million to 340 million, a figure that is set to climb further, to some 590 million, by 2030.

By this date, India will have 68 cities with populations exceeding 1 million people, 13 cities with over 4 million occupants and six "megacities" with over 10 million residents.

More specifically, it was predicted that Mumbai and Delhi were likely to be among the five largest cities in the world in 20 years time.

At present, 75% of city dwellers in India earn an average of just 80 rupees ($1.80; €1.36; £1.18) a day, but the number of households earning less than 90,000 rupees a year should fall below 20% for the first time by 2030.

Similarly, while there are now 32 million middle class households with an annual income in the range of 200,000 rupees to 1 million rupees a year, this figure will jump to 147 million in the same timeframe.

Overall, India's cities will generate more than 70% of national GDP and employment by 2030, with their expected expansion contributing to a near fourfold increase in per capita income across the country.

In just one demonstration of the potential this affords, the Mumbai Metropolitan Region alone will have a gross domestic product of $265bn by 2030, equivalent to the current GDP of Malaysia.

The 200 million people living in close proximity to India's largest cities areas could provide another valuable target audience, as they generally have an income that is 10% to 20% higher than in rural areas.

"These economic trends will unlock many new growth markets, many of them not traditionally associated with India," the McKinsey Global Institute said.

However, they will also present unprecedented challenges to domestic infrastructure from water systems to public transport, requiring an estimated $1.2trn of investment, McKinsey estimated.

Synovate, the research firm, also recently issued a report arguing that marketers should target all five tiers of cities in China, rather than solely focusing their efforts on Shanghai and Beijing.

Data sourced from McKinsey Global Institute; additional content by Warc staff