Five priorities for India Inc that can help us get ahead of the curve

India is well positioned not only to adapt to these changes but also to use them to catalyze truly sustainable and inclusive growth. This could be ‘India’s century’. Has the potential to create 600 million new jobs and increase per capita income sixfold by 2047.

To get there, effective government action is needed in the form of improving our human capital and physical infrastructure. But the private sector also has a big role to play. India Inc has come into its own over the last 30 years; That said, it can still step up its game.

Here are five priorities.

Take sustainability seriously: According to a recent McKinsey report, to achieve effective decarbonization (up to 1.9 GtCO2e by 2070), India will need to spend $7.2 trillion on green initiatives. This is a huge amount, but it also means immense possibilities. About 75% of the existing industrial capacity in India in 2050 is not yet built; Which provides an opportunity to build sustainably from scratch. For the business, the opportunity to become a global leader in areas such as green steel, hydrogen, carbon capture and clean tech is very real, as these are all nascent industries. In the automotive sector, for example, India is a major exporter of two and three wheelers. It could use this position to lead the transition to electric vehicles (EVs), especially in markets similar to its own, such as Africa, Latin America and Southeast Asia. Experience around the world shows that companies that set decarbonization targets can mobilize their organizations and act on value-creation opportunities.

Re-ignite capital expenditure strategies: In recent years, most of the capital expenditure (capex) in India has been driven by government expenditure and public sector companies. In addition, growth in net fixed assets has been low, and the productive base of many large companies has grown little in real terms. Companies that piece together defensive plans can execute capex projects faster and more cost-effectively, positioning themselves for continued growth. Given rising interest rates, this won’t be easy, but high asset-utilization rates make it imperative.

Accelerate the innovation engine: India has moved up from 81st in 2015 to 40th in 2022 in the Global Innovation Index, outperforming expectations given its level of development. There is scope for further improvement in this. Indian companies account for less than 40% of total research and development (R&D) spending, compared to more than 65% in other large economies. For starters, companies can examine themselves and learn about their ‘Innovation Quotient’ (IQ), which evaluates their preparedness, strength and execution capabilities. Large manufacturers can encourage innovation among their suppliers by offering grants for successful innovations.

However, greater potential may lie in collective action. Companies can work together to form innovation clusters – economic centers where capital, expertise and talent collaborate on new or nascent technologies. Clean energy, smart mobility and water sufficiency are three high potential areas.

Building digital technology capabilities: The global technology services market is expected to grow by about 5% annually over the coming years: cloud and digital services alone represent a $600-700 billion opportunity by 2025.

With low data costs and over 800 million internet users, India’s digital consumer sector is growing rapidly: India’s consumer digital economy could become a $1 trillion market in a few years. The government’s open network for digital commerce effort can help cut costs and increase interoperability. But it will depend on the business to make e-commerce and digitization a reality for most Indians. In 2022, e-commerce will account for less than 8% of retail sales.

The common denominator enabling all this is talent, to re-skill workers in traditional tech services, which are expected to decline, and to take advantage of new opportunities. Creating industry-wide skills and certification mandates, working with industry groups such as NASSCOM and Sasbumi in high-growth digital areas such as artificial intelligence, machine learning and product management, is a promising approach.

Accept that resilience and growth go hand in hand: In the near future, Indian companies can strengthen their resilience by building strong relationships with suppliers and localizing operations. They need to be agile in the way they work and build partnerships that prepare them to weather disruptions such as energy security, cyber shocks and weather events.

In the medium to long term, business leaders can create positions that will enable them to take advantage of new and emerging opportunities. With changes in global supply chains, India can use its low labor costs and manufacturing expertise to reach $1.2 trillion in global trade flows by 2030. Promising sectors include automotive, electronics, semiconductors, chemicals and medical devices.

With India’s growing workforce, relatively strong fiscal position, deep capital markets and an ever more confident business sector, the country may be in its best position today to deliver the broad-based prosperity that our founding fathers dreamed of 75 years ago. saw. However, success is not ensured by that alone; This will only come with focused and effective action.

Rajat Dhawan is Managing Partner of McKinsey & Company in India