Forget labor sourcing: India as a demand center

Courtesy of Mukund Mohan, I saw this McKinsey report from last summer on India's rapidly growing middle class.

"If India continues on its current high growth path, incomes will almost triple over the next two decades, and the country will climb from its position as the twelfth-largest consumer market today to become the world's fifth-largest consumer market by 2025."

Some may call the report overly optimistic with 7% compound annual growth given India's infrastructure challenges and the poor productivity in agriculture (and McKinsey expects even in 2025, 63% of the population will be rural).

But it points to a shift in how many Western companies are seeing India. Many of the clients I take for outsourcing due diligence are also exploring channel and market opportunities there.

But even as the middle class grows in affluence, it is a price sensitive market. Hence, products like the $ 2,200 car which we would not even dream of producing in the West. That also portends a more feisty set of Indian competitors at those price points in many global consumer markets.

Comments

[Nitin Goyal]

Vinnie,
I sometimes wonder if the India growth storyis really what it is made out to be. See my post:
http://nitnblogs.blogspot.com/2008/01/indian-tiger-again.html
on this McKinsey study.
Thanks,
Nitin