Based on purchasing-power parities, in 2005 the US, China and India were respectively 1, 2 and 4 in world GDP ranking. In 2020 this is forecasted to change to 2, 1 and 3. The rise of China as a global economic giant is well understood but what of India. With its crumbling infrastructure and corrupt politics, how will India rise to the third largest economy in the world?
The answer lies in consumer savings and spending. Some facts:
- Consumer spending accounts for 64% of the Indian GDP. This compares to 58% in Europe, and 42% in China.
- Of the $450M in annual consumer spending, only 2% is done with credit, direct pay or debit
- India has the highest density of retail outlets of any country in the world, 15 million. The US has 900,000 where the market is 13 times India's.
- Only 4% of Indian store are bigger than 500 square feet.
- Organised retail in India therefore has a great opportunity and is already growing at 20% annually.
- Local conglomerates such as Bharti and Reliance are planning huge investments in organised retailing in India.
- Global retailers such as Walmart and Carrefours are eager to enter India. Walmart would transform both the retail supply chain and would likely drive Indian exports. Walmart accounts for 10% of the exports from China to the US.
The Indian population is the youngest in the world and as income levels rise, they are busy buying all the things young people are want to: housing, transportation, financial services, processed food, entertainment, telecom services and so on.