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India to be 5th largest economy: BCG

India will become 5th largest economy at $4.4 tn,Boston Consulting Group said.

Written by Ashok Kumar(IndianExpress.com) | New Delhi |
November 4, 2011 2:38:10 pm

India is all poised to see huge growth opportunities and become the 5th largest economy (nominal GDP) globally at $4.4 trillion by 2020 (from 9th currently),according to a report released by a Boston Consulting Group,the knowledge partner of the Indo-Japan Summit 2011.

Betting high on the Indian growth prospects,the report says that the subcontinent’s consumption basket which is one third of Japan at present will rise phenomenally to almost twice the size of Japan by the year 2030.

Riding on this growth path,the report says,the Indian infrastructure sector is expected to see an investment of upto $1 trillion dollars over the next plan with the investments of billions of dollars in sectors such as power,roads,railways,telecom and irrigation.

Japan which currently has 70 per cent of its exports concentrated in US,Europe,China,S Korea and Taiwan is looking forward to tap the huge opportunities for Japanese-Indian cooperation across sectors ranging from infrastructure to the pharmaceuticals.

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Admitting that Japan is a late entrant in tapping the Indian market,compared to the other European and Asian countries like Korea,Hiroaki Sugita,senior partner and managing director,BCG Japan said that in the last five years there has been a strong rise in the Japanese interest in India which has moved beyond the traditional focus areas of automotive and electronics.

Dwelling on the delay in focusing on India,Sugita said,“The initial focus of Japan was on China,since the Chinese growth story preceded the Indian one,by around six or seven years. It was because of this gap that the Japanese attention to India got delayed by a couple of years.”

Drawing a comparison between the China and India,Hiroaki Sugita said,China is looked at for short term advantage,but India because of certain factors like huge population of young and working people and a vast English speaking base,presents a long term advantage.

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Arindam Bhattacharya,managing director,BCG India said,because of natural disasters,especially after last March’s devastating earthquake and tsunami,Japan is looking for areas in the emerging economies for safer investment in various sectors. “From the Japanese perspective,India is being looked as one of the places for the risk mitigation,’ he said.

When asked if the newly cast focus on the India,in the light of its robust consumption,and huge market potential will help the country in becoming a global manufacturing hub,Arindam said,India is already being seen as a major engineering centre worldwide,and is racing towards becoming one of the major manufacturing pillars of the world,therefore,if not currently,in near future,the country is certainly poised to become the global manufacturing base.

Commenting on why Japanese companies have lagged behind in tapping the Indian market in comparison to other Asian countries,Shigeki Ichii,partner and managing director,BCG Japan,felt that it was because of difference between ‘speed of penetration’ in the Indian market. “Japanese companies so far targetted the top segment and could not fully tap the latent potential of the middle and the lower segments (which the other global giants have successfully done). But,the new initiatives being taken by the major companies will help Japan target the Indian middle class segment,which is emerging as an important factor in the subcontinent’s market,” Ichii explained.

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“We have to learn lessons from other global giants,who have made faster inroads into Indian market then us. For that,a greater research on the present market dynamics (rising importance of Indian middle class) will be studied and implemented by the Japanese companies,” Ichii said.

While the bilateral trade between India and Japan has increased by 2.5 times since 2000 -01 to reach to $10 billion at present,the Foreign Direct Investment ( FDI) flow into India has also considerably increased from $200 mn in 2005-06 to $1600 mn in 2010-11,according to the BCG report.

Both India and Japan have committed themselves to leverage this opportunity to increase the bilateral trade between two countries to $25 bn 2014-15 through the comprehensive economic partnership agreement (CEPA),the report highlights.

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First published on: 04-11-2011 at 02:38:10 pm
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