China is the big kid on the playground in east Asia. But it’s increasingly India – the world’s fastest-growing large economy – that should get more attention… even (or especially) when it comes to the “internet of things” and the tech revolution.
In case you forgot: India has the world’s second-largest population, and the world’s seventh-largest economy. In 2015, its economy was the same size as Brazil’s (and is likely now bigger) and was larger than Russia’s.
But even with a US$2 trillion-dollar economy, India is still very poor. Last year, India ranked 145th in the world based on per capita GDP.
But according to a report by global management consultants McKinsey & Company, extreme poverty has fallen sharply. In 1994, 45 percent of the population lived in extreme poverty. As of 2012, 22 percent, or around 270 million people, lived in extreme poverty.
But that’s not the full picture. McKinsey estimates that 56 percent of the population (680 million people) don’t have enough money to meet “minimum acceptable living standards.” These cover basic levels of nutrition, water, sanitation, energy, housing, education, and healthcare.
India’s expected economic growth
The good news is that India’s rapid growth is – slowly – taking care of poverty. Its economy is projected to grow faster than that of any large economy in the world over the next five years.
To put India’s growth and size into context, McKinsey compared the projected size of India’s biggest cities’ economies in 2030, with the GDP of some countries as of 2014. It estimates that in 2030, Delhi’s economy (the third largest city in India today) will be as large as the Philippines’ economy was in 2014. Mumbai’s economy, in 2030, will be as large as Malaysia’s was two years ago. And by 2030, the city of Ahmedabad in western India will have an economy that’s as big as Vietnam’s was two years ago.
The technology sector is set to explode
Technology is going to grow far faster than India’s economy as a whole. India already has over 1 billion mobile phone users. It also has the second-largest online population in the world (after China), with 462 million internet users. These huge numbers of users are laying the groundwork for explosive growth in other technologies like the mobile internet, digital payments, cloud computing and the internet of things.
When you talk about numbers for countries like India and China, it’s like talking about the universe – it’s hard to comprehend the numbers involved because they’re so big. 10 billion washing machines, refrigerators, mobile phones and microwaves connected over the internet of things – in one country – is that kind of incomprehensible big number.
If these technologies are adopted as much as expected, these applications could have an annual economic impact of US$500 billion to US$ 1 trillion per year in 2025, according to McKinsey. That would represent 20 to 30 percent of India’s incremental economic growth between 2012 and 2025.
India will have to deal with enormous challenges before joining the economic premier league. So just because it’s a great long-term growth story doesn’t mean it’s the best investment for your portfolio at the moment. But as we’ve written recently, if you get the big picture right, it helps a lot. And because of its size and economic trajectory, India is painting a very big economic picture.
We’ll be talking a lot more about India in coming months.