India and China economic powerhouses by 2020

Sufia Tippu
Sunday, 25 June 2006 12:48

IT Industry - Market

BANGALORE: By the year 2020, India will contribute 12.2% to global economic growth, while China will emerge as the world’s second largest consumer market according to a new study.

The "Foresight 2020" study, conducted by Economist Intelligence Unit (EIU) and sponsored by networking leader Cisco Systems, surveyed 1,656 executives from 100 countries and conducted in-depth interviews with executives, analysts and policy makers in late 2005. The study was conducted in order to understand long-term demographic, economic and corporate trends and assess likely changes to the global economy. The study covered eight key industries - automotive, consumer goods & retailing, energy, financial services, healthcare & pharmaceuticals, manufacturing, public sector and telecoms.

According to the study, India will continue to be one of the fastest growing economies. By 2020, the study predicts India as a trading nation will record the biggest jump in world ranking - from 24th to 10th. 
In addition, India, China and the US will jointly contribute $1 trillion dollars to the global economy by 2020. The next 15 years will see Asia, particularly powerhouses India and China, outpacing the rest of the world in Gross Domestic Product (GDP), wages and consumption.

Propelled by fast growth in India and China, Asia will increase its slice of the world's GDP from 35% in 2005 to 43% by 2020. India's share in the global GDP will rise from 6.2% in 2005 to 8.8% in 2020.

Developing Asia will account for two-thirds of the increase in employment growth, with India alone making up 30% of the net increase in global employment with 142 million new jobs, according to the study.

The study also predicts that the world's consumer spending will expand at an annual rate of 5.6% to $62 trillion by 2020, compared to $27 trillion today.

Though the US will continue to be the largest consumer market, China will emerge as the world's second largest one. India will rival the bigger European markets and its share in world consumer spending will increase from 1.9% in 2005 to 3.1% in 2020, the study predicts.

India's growing integration with the global economy and its favorable demographics are likely to ensure a sustained rate of growth of 5.9% a year during 2006-20. India's democracy is well entrenched, its legal system is generally impartial, if slow-moving, and its constitution is respected.

However, India's much-vaunted IT sector accounts for too small a share of GDP to be a long-term driver of growth. Much more will depend on the modernization of the country's agriculture and manufacturing, the study added. 

Specifically the study found that tailored customer experiences will play a critical role in economic success. Companies will differentiate themselves and create competitive advantage by creating high touch customer experiences through customization of products and quality of customer services.

"The rapid growth of India as reflected in this survey is already apparent in the evolving and complex needs of our customers in the Indian market," said Ranajoy Punja, Vice President-Marketing, for Cisco Systems. "As production processes and transactions become more commoditized and automated, value with customers lies in hard-to-replicate personal relationships and interactions. These interactions will be heightened by collaboration, high-value services and knowledge workers all enabled by technology."

"Knowledge workers combined with IT can change customer experiences. Companies that can collaborate globally to create the customer experience will win the competitive battleground."