By: Edwin Fuller
Founder and President of Laguna Strategic Advisors
Make no mistake about it: India is on the move. After his landslide election victory in May 2014, Prime Minister Narenda Modi told his nation that he needed just 10 years to modernize the country and promised that by 2022, India’s 75th anniversary of independence, the world would recognize that the 21st century is India’s.
Over the 15 months since taking office, Modi has become a rock star for India’s enormous cohort of optimistic millennials and business community as well as for the Indian diaspora. His appearance at Madison Square Garden in New York last September drew a record crowd of more than 18,500. Since taking office, he’s made 26 international trips, mostly to countries in Asia, but also to North and South America, Europe and Australia—selling potential investors on doing business in India. At home, he’s been streamlining the Indian bureaucracy, easing anti-business regulations and selling his constituents on his vision for India.
When Modi took office, Indian inflation was running at 9% and economic growth was 5%. Today, inflation is down to 5% and the International Monetary Fund estimates the Indian economy will grow 7.5% in 2015, outpacing China’s growth for the first time since 1999. And the country’s future prospects look promising. The World Bank predicts India has the potential to be the world’s 3rdlargest economy within the next 10 years and to be one of the world’s largest by mid-century. GDP is expected to grow between 7.5% and 8.3% in the coming year.
Perhaps India’s $2 trillion economy will remain much smaller than China’s $10 trillion behemoth for years to come. But with today’s low oil prices, the world’s largest democracy and its huge, skilled population have lots of room to grow.
Even now, India is the world’s 4th largest IT start-up hub with more than 3,100 tech startups in the past year alone. It ranks second in worldwide food production. Its auto industry churns outs 22 million cars a year, making it one of the world’s largest auto manufacturers. It boasts a $600 billion retail market and is one of the world’s fastest growing e-commerce markets. And earlier this year, under his “Make in India” policy, Modi helped persuade Korea’s giant Samsung and Europe’s Airbus to open new factories in his country.
According to Ernst & Young, India’s middle class, about 50 million strong, or 5% of the population, will reach 200 million five years from now. They predict that India’s middle class growth will accelerate quickly, reaching 475 million by 2030 and will be adding more people than China to the global middle class just 12 years from now.
As its middle class expands, India’s outbound tourism market is also growing. By 2020, it is expected to exceed $40 billion. Favored destinations for Indian travelers today are Singapore and Thailand, followed closely by the U.S. and China in third and fourth place, respectively. According to Renub Research’s Report, Indian Outbound Tourism Market/Spending Analysis, in terms of spending by Indian tourists, the U.S. ranked first in 2014. In fact, Indian travelers spent more on their trip to the U.S. than on the combined total spent on the top nine tourism destinations.
So, it’s not surprising that the world’s travel market is carefully noting the trends, including Ireland, Spain, South Korea, Indonesia, Macau (China) and Poland—all of which recently opened tourist offices in India.
A decade from now, India will clearly be a vastly different country than it is today and may very well be Asia’s newest shining economic star. With roots in its rich and diverse past (dating back more than 250,000 years), its religious and philosophical traditions (8 major religions or philosophies of life are actively practiced in the country), its young people’s optimism (more than half of the population is under 25 years of age) and, of course, its growing middle class, India is well on its way to becoming a significant global player in this century. It will be great to watch, and perhaps participate in, its emergence on the world’s stage.