McKinsey & Co Identifies 18 High-Growth Sectors That Could Reshape India’s Economic Trajectory
India is on a strong growth trajectory, with its share of global GDP rising from 1.9 per cent in 2008 to 3.4 per cent in 2023. What would it take to achieve the ambitious target of 8 to 10 per cent share of global GDP by 2040? In a new report ‘India’s Future Arenas: Engines of Growth and Dynamism’ McKinsey & Company has identified 18 ‘arenas’ or transformative sectors, marked by uniquely high growth and dynamism that could potentially generate $1.7 trillion to $2 trillion in revenues for India by 2030, up from $690 billion in 2023.
Nine of these are global arenas (like electric vehicles and batteries, semiconductors, e-commerce, robotics, cyber security and nuclear fission) where Indian companies could attain disproportionate growth through distinctly Indian capabilities. The rest are ‘national arenas,’ or sectors (medical devices, biopharma, urban construction, renewables with storage system, industrial electronics, and travel and tourism) that could advance long-term strategic interests and fuel growth in a uniquely India-specific context.
These 18 arenas were identified basis 3 core ingredients: technology or business model step-change, escalatory investment dynamics, and cultivation of a large and growing addressable market.
Rajat Dhawan, India Managing Partner, McKinsey & Company, and co-author of the report
Rajat Dhawan, India Managing Partner, McKinsey & Company, and co-author of the report says, “Together, the arenas represent powerful focus areas for India’s next economic leap as they could capture approximately 30 per cent of India’s incremental GDP by 2040. Although precise trajectories are difficult to forecast, breakthroughs in these arenas could propel India toward its aspiration of global economic leadership.”
The India report is based on a McKinsey Global Institute study, `The Next Big Arenas of Competition’ that could reshape the global economy in the next 10 to 15 years, potentially generating up to $48 trillion in revenues and $6 trillion in profits. Indian firms, which played a limited role in the arenas between 2005 and 2020, will play a significant role in select global and national arenas of the future.
“The 18 arenas were arrived at based on 3 core ingredients – potential for technological or business model step change, escalatory investment dynamics and a large and growing addressable market. Each arena represents a certain strategic position for India, contingent upon the extent of India’s capabilities and the market focus on either India alone or on broader world markets, thereby requiring a differentiated playbook to win,” says Bhavesh Mittal, Partner, McKinsey & Company, and co-author.
Medical devices: India’s medical devices industry is expanding at 12 to 15 per cent CAGR, with growth driven by rising healthcare needs and consumer awareness. The sector is shifting towards local manufacturing, increasing exports and India emerging as an attractive location for global R&D supported by a pipeline of biotech talent.
National arenas of growth
Biopharma: For long a ‘pharmacy to the world,’ India is moving up the value chain in the global pharma supply chain, driven by Global Capability Centres (GCCs) and an expanding CDMO ecosystem. Additionally, with biopharma accounting for 15 to 20 per cent of pharma revenues in India (significantly below the global average of 50 per cent), there is ample headroom for growth, as seen by a surge in biotech startups and innovation with focus on addressing rising obesity and other non-communicable diseases.
Renewables with storage: India’s renewable energy sector is well placed for growth, with annual capacity additions expected to be two to three times higher by 2030, as the country works toward its 500 GW target. Growth is driven by rising power demand, falling technology costs and decarbonization policies. Energy storage, particularly Battery Energy Storage Systems (BESS), will be crucial to maintain a reliable power supply, and are expected to meet ~35 per cent of India’s storage needs with hybrid renewable-storage projects offering the highest returns.
Bio-to-X: India has opportunity to transform biological feedstock into a range of high value products such as bio-building blocks, bio-cosmetics, bio-food additives, etc. Within bio-building blocks, two emerging opportunities stand out: bioethanol and biobutanediol (bio-BDO – commonly used in solvents, plastics, elastic fibres and polyurethanes). India has a competitive cost base and access to sugarcane and corn, presenting opportunities to become global biomanufacturing hub, but success will require consistent raw material sources, strategic plant sites and operations capable of handling multiple varieties of feedstock.
A targeted playbook tailored to each opportunity type would be needed to help Indian enterprises deepen competitiveness and create long-term value across sectors. The report concludes that while the path to 2040 may hold uncertainty, the opportunities within the arenas are tangible and urgent. A strategic push could allow India not only to accelerate its domestic transformation but also to lead globally in select sectors.
