0. INDIA ECONOMIC DEVELOPMENT AND BUSINESS OPPORTUNITIES
Arun Maira
The Boston Consulting Group
Barcelona
November 22, 2004

1. INDIA: PAST, PRESENT, FUTURE
Phase 1: The Past
Phase 2: The Present
Phase 3: The Future
17th largest economy
12th largest
economy
3rd largest economy
US $ Mn
30000
CAGR = 3.9%
CAGR = 5.1%
Expected CAGR = ~ 9%
25000
15000
10000
5000
2000
1000
CAGR(1) = 8 %
400
Tenth five year plan ( )
Note: CAGR = Compounded Annual Growth Rate
Source: Industry estimates

2. INDIA HAS REGISTERED THE FASTEST GROWTH AMONG ALL MAJOR DEMOCRACIES IN THE RECENT DECADE Phase 2
India has the fastest growth among all democracies having GDP > $ 100 Billion
Annual GDP growth rate
India
Mexico
Finland
France
Germany
Source: World Development Indicators Report (data for , average annual percentage growth)

3. BY 2050, INDIA IS PROJECTED TO BE THE 3RD LARGEST ECONOMY IN THE WORLD
Largest economies in 2050
GDP in 2050
(US$ Bn)
Huge gap between three largest economies and the next few
India to overtake France in 2018
Source: Goldman Sachs Economic Paper # 99, BCG Analysis

4. Median age of population in the OECD countries is rising ...
POPULATION IN SOME COUNTRIES IS RAPIDLY AGEING Problem Most Pronounced in the Developed World
Median age of population in the OECD countries is rising ...
Median age (year)
(Average for OECD countries)
...this will have several socio-economic implications (select examples)
Shortage in workforce
Potential decline in growth rates
Increase in wage rates for workers
Pressure on social security and pension systems
Increase in services to the older population
Source: Scarpetia and Blöndal; United Nations Population Division, World Population Prospects, The 1998 Revision; BCG analysis

5. THE FUTURE DEMOGRAPHIC MAP
Potential surplus population in working age group (2020)
Germany
-3 Mn UK
-2 Mn
Russia
Czech
Republic
0Mn
-6 Mn
-1 Mn
Ireland
Turkey
-17Mn
France
-3 Mn
Iraq
2Mn
China US
-10 Mn
2Mn
Israel
-9 Mn
Japan
Spain
Iran
Pakistan
-3 Mn
-2 Mn
0Mn
5Mn
3Mn
19 Mn
7 Mn
Philippines
Italy
47 Mn
5Mn
4Mn
Bangladesh
Mexico
Egypt
India
4Mn
Vietnam
1Mn
Malaysia
3Mn
5Mn
Indonesia
Brazil
-0.5 Mn
Australia
Note: Potential workforce surplus is calculated keeping the ratio of working population (age group 15 – 59) to total population constant and under the assumption that this ratio needs to be broadly constant to support economic growth. Therefore, India will have 47 Million more people in the working age group/total population by 2020 compared to today, while France will have a deficit of 3 Million people in the working age group compared to today.
Source: U.S. Census Bureau; BCG Analysis

6. INDIA WILL CONTINUE TO HAVE A GROWING POPULATION TILL 2050 AND BEYOND
Projected population growth rates
Net population
Bn people
India: Continuing to grow upto 2050
China: Declining after 2032
Brazil: Declining after 2050
0.2
G6:Declining after 2050
Russia: Already declining
0.1
Source: Goldman Sachs Economic Paper # 99, BCG Analysis

7. IN , LARGEST SHARE OF INDIA`S POPULATION WILL BE IN THE WORKING AGE GROUP Resulting in a Favourable “Demographic Bulge”
India Demographic Profile (2020)
China Demographic Profile (2020)
France Demographic Profile (2025)
Age group
Age group
Age group 60 40 20 60 40 20 3 2 1
Mn people
Mn people
Mn people
age group :
325 mn people (~25 %)
age group :
308 mn people (~21 %)
age group :
11 mn people (~17 %)
Source: CII Conference 2002; CSFB Report; UN Population Division; BCG Analysis
Female Male

8. ECONOMIC GROWTH BECOMING MORE INCLUSIVE
Level of affluence steadily increasing in India
Distribution of people by income group (1995 vs 2002 vs 2007)
Number of
people
(million)
1099
998
886
Middle to High
Additional 283 mn people from
'95 to '07
Lower Middle
Additional 185 mn people from
'95 to '07
Low
Note: Categorisation of households on the basis of income (Rs pa) at 1995 prices: Low : <=22,550; Lower middle : 22,501-45,000 ; Middle to high : >45,001
Source: Statistical Outline of India, 2002

9. DEMAND ALSO RISING IN RURAL INDIA
Rural India consuming a high share of many “non essential” consumer goods
% Share for 2000
Rural
Urban
Source: NCAER ; Literature review
Source: NCAER ; Literature review

10. Bubble size corresponds to GDP size
INDIA TO BE 3RD LARGEST ECONOMY, BUT WITH RELATIVELY LOW PER CAPITA INCOME Pattern of Growth Not Witnessed By Any Other Country
GDP vs GDP per capita in 2002
GDP vs GDP per capita in 2050
GDP (US$ Bn)
GDP (US$ Bn)
China US US
India
Japan
Italy
Germany
France
Germany
India
China
Russia
Italy UK
Brazil
Japan
Brazil
Russia
France UK
GDP per capita
(US$)
GDP per capita
(US$)
Bubble size corresponds to GDP size
Source: Goldman Sachs Economic Paper # 99, BCG Analysis

11. TWO INDIAS: ONE COMPETING INTERNATIONALLY; THE OTHER BEHIND
IMPLICATIONS
"COMPETITIVE INDIA" PROVIDES OPPORTUNITIES IN INTERNATIONAL TRADE AND BUSINESS
LARGE POOL OF LOW COST RESOURCES YET TO BE TAPPED
THE CHALLENGE AND BENEFITS OF 'INCLUSIVE DEVELOPMENT'
POOL OF
LOW COST RESOURCES
INDIA
SHINING
THE WORLD
EXTENSION OF
BENEFITS OF GLOBALISATION

12. Comparative salaries of an IT engineer Comparative salaries of an MBA
INDIA OFFERS EXCEPTIONAL VALUE AT SIGNIFICANT COST ADVANTAGES Comparison of Manpower Costs
Comparative salaries of an IT engineer
Comparative salaries of an MBA
$ pa
$ pa
80,000
7,500
Source: Literature Survey

13. INDEPENDENT SOURCES CONFIRM INDIA IS BEST IN QUALITY AND QUANTITY OF PEOPLE FOR GLOBAL SERVICES
Surplus
India
Indonesia
Mexico
Philippines
Projected workforce in 2020
Brazil
Malaysia
Israel
Turkey
Ireland
Russia
China
Shortfall
Low
People strength
Productivity/quality
English language skills (1)
Cost
High
Note: Pakistan, Bangladesh and Vietnam have not been represented for lack of reliable data on productivity and cost of service employees
Over 50% of shortages expected from English speaking countries
Source: World Competitiveness Yearbook 2001, Britannica yearbook, Literature search; BCG analysis

14. SOMEDAY REAPING WHAT YOU SOW
Vertical integration
Small volumes, but growing
Logistics & infrastructure problems
INDIA'S LEGACY
MASS
MANU-
FACTURING
REMOTELY PROVIDED
SERVICES
Small volume, high variety, low cost mfg
INDIA'S OPPORTUNITIES 
Domain knowledge
Software capabilities
Remote delivery possible
INDIA'S STRENGTHS

15. INDIA EMERGING AS THE " SERVICE CAPITAL OF THE WORLD "
India already providing knowledge-based services in several sectors
Remotely delivered services
Import of customers to
service in India
Transaction processing
Design and analysis
Research and development
Value added tourism
Leisure tourism
Industry
Information Tech
Pharma/Healthcare
Education Services
Auto/ engineering
Chemicals
Financial Services                      
Source: BCG Analysis