Look at McKinsey’s big picture, but don’t get seduced by it—great power has to be earned, it’s not fated
Indians reading the latest McKinsey Global Institute (MGI) report on the shifting global landscape are certain to be pleased. While there are 8,000 distinct large companies with annual revenues of over $1billion today, three-fourths of which are based in developed countries, this is going to change dramatically. An additional 7,000 firms are going to get added to this pool by 2025 and 70% of these new firms are going to be in developing countries like India. That this will happen is obvious. Firms are to be found where GDP grows and if that centre is going to shift to the east, the firms will be part of that journey. What lends credence to this is the MGI forecast that India and China will provide more than half the increase in the world’s supply of workers with some college education and two-thirds of those with science and technology degrees by 2030.
While McKinsey is flattering about Tata Motors and the Aditya Birla Group and low-cost innovation in general, it is useful to keep some perspective. While MGI forecasts that more than 45% of the Fortune 500 will be in emerging nations by 2025, 120 of these firms will be from the China region and just 10 from India—that, though, is a big jump from the 1 right now in the global 2000. But getting there requires hard work, not fate. Most big firms, for instance, are centred around big cities—name one truly world-class Indian city. Indeed, much of the shift MGI is talking about is driven by urbanisation, something India is not doing a particularly good job of encouraging. Lot of the change is driven by consolidation of industry, something Indian policy seems to frown upon. It is also true that as urbanisation grows, the political class starts responding differently, so it is possible future politicians will pay greater heed to urban India’s needs, even respond differently to what business wants. The moves over Telangana and the fate of Hyderabad, however, suggests it will be a while before India is ready to embrace this big change. Given 2025 is just a decade away, it seems a tough climb.