India’s Future Arenas: Engines of Growth and Dynamism Report by McKinsey & Co.

The report by McKinsey & Company identifies 18 high-growth, dynamic “arenas” in India that are poised to reshape the nation’s economic landscape. These arenas could generate up to $2 trillion in revenues by 2030 and capture approximately 30% of India’s incremental GDP by 2040. The transition from traditional sectors to these arenas is driven by technological breakthroughs, sustained investment and the cultivation of large addressable markets. The report categorizes these opportunities into four archetypes – Build for India, Pursue Accelerated Scale-up, Build Global Competitiveness and Achieve Global Leadership depending on India’s current capabilities and market focus.

Key Data Points

• India’s share of global GDP rose from 1.9 percent in 2008 to 3.4 percent in 2023.
• The Government of India is targeting an 8 to 10 percent share of global GDP by 2040.
• The 18 identified arenas could generate between $1.7 trillion and $2 trillion in revenues for India by 2030.
• These arenas accounted for approximately $690 billion in revenue in 2023.
• They are expected to contribute about 30 percent of India’s incremental GDP by 2040.

Section 1: Build for India: Focus on National Self-Reliance

These arenas feature potential capabilities but have a strong domestic focus to reduce import dependency.

• Semiconductors: India accounts for 20% of the global semiconductor design workforce.
• Semiconductor Funding: Approximately $10 billion in government incentives have been allocated to the sector.
• Chip Imports: Strategic moves in fabrication are expected to reduce chip imports by $10 billion to $20 billion.
• Robotics: India has the 7th-highest number of robot installations globally.
• Industrial Automation: This field is expected to double in India over the next five years.
• Nuclear Capacity: India currently has ~8 GW of installed nuclear capacity, with another 7 GW under construction.
• Nuclear Targets: The government aims to scale civil nuclear capacity to 100 GW by 2047 to reach net-zero goals.
• Industrial Electronics: These systems account for 12% of India’s total domestic electronics production, valued at $101 billion.
• Import Dependency: Currently, more than 90% of India’s string inverters for power electronics are imported.

Section 2: Pursue Accelerated Scale-up: Strong Domestic Capabilities

These are areas where India already has strong foundations and can rapidly scale to meet massive internal demand.

• Renewables Target: India is working toward a 500 GW renewable energy target by 2030.
• Energy Costs: By 2040, renewable-plus-storage hybrids are projected to be cheaper than 60-70% of existing coal plants.
• E-commerce Users: Only 20-25% of India’s 850 million internet users shop online, leaving massive room for growth.
• Retail Share: E-commerce is expected to rise from 7-9% of total retail sales in 2023 to 15-17% by 2030.
• Income Trends: Monthly incomes in tier-two cities grew by 18% between 2023 and 2024, fueling e-commerce adoption.
• Data Center Growth: Data center capacity is expanding at 26% annually, with investments forecast to reach $5.7 billion by 2026.
• Tourism Impact: The travel and tourism sector supports nearly 12% of total employment in India.
• Outbound Travel: Outbound spending is projected to reach $89 billion by 2027, double the 2019 levels.
• Urbanization: An estimated 600 million people are expected to live in Indian cities by 2030.
• Affordable Housing: The Pradhan Mantri Awas Yojana–Urban has sanctioned 11.7 million homes since 2015.

Section 3: Build Global Competitiveness: Targeting World Markets

In these sectors, India is strengthening budding capabilities to compete on a global stage.

• EV Penetration: Electric vehicle penetration has increased tenfold over the past five years.
• EV Sales Projections: By 2030, EVs are expected to account for 20% of sales in four-wheelers and 30-35% in buses.
• Battery Costs: Lithium-ion battery costs are projected to drop by roughly 40% between 2023 and 2030.
• Battery Demand: Domestic demand for batteries is set to grow 15 times between 2025 and 2040.
• Domestic Battery Capacity: India is expected to have ~75 GWh of high-probability domestic battery capacity by 2030.
• Recycling Potential: India could meet 20-30% of global demand for lithium, nickel, and cobalt through battery recycling by 2050.
• Medical Devices Growth: This industry is expanding at a compound annual growth rate (CAGR) of 12% to 15%.
• Talent Pipeline: India produces more than 40,000 biotech graduates every year to support R&D.

Section 4: Achieve Global Leadership: High Capability & Global Focus

These arenas leverage India’s distinct competitive advantages to lead global markets.

• Auto Components: Projected to grow from $70-$75 billion in 2023 to $160-$190 billion by 2030.
• AI & Software: This arena is estimated to reach $40-$50 billion in revenue by 2030.
• Cybersecurity: Revenues are expected to grow from $30-$35 billion to $65-$80 billion by 2030.
• Space Sector: Projected to triple or quadruple in size, reaching $20-$30 billion by 2030.

Conclusion

India stands at a pivotal juncture where the successful navigation of these 18 arenas could take the nation toward its goal of becoming a developed economy by 2047. Realizing this potential will require coordinated efforts, including cross-sector collaboration, decisive corporate action and supportive government policies. By shifting focus from incremental progress to these high-growth and dynamic sectors, India can build global competitiveness to achieve leadership in the global economic landscape.

You can check out the full report here.