Thought this might be of interest to some. Remember when the Indians were talking about a population explosion? :)

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Source
- http://www.economist.com/daily/news/displaystory.cfm?story_id=9135582&top_story=1

India's consumers
The coming boom
May 3rd 2007 | DELHI
From The Economist print edition

India's consumption could leapfrog Germany's in two decades

IN CASE any potential investor has missed India's run of 8% growth and billion-person potential, the consultants at McKinsey have provided a useful jab in the ribs. In a report on India's consumer market published on May 3rd, they have added detail to the probable economic explosion ahead. Assuming annual growth averages 7.3% over two decades—a reasonable bet—India may overtake Germany as the world's fifth-biggest consumer market by 2025. It predicts the middle class will expand from 50m to 583m, leaving only a fifth of Indians in the bottom household-income bracket, earning less than 90,000 rupees ($2,200) a year (see chart).

All sorts of businesses will profit. But the report, “The Bird of Gold: the Rise of India's Consumer Market”, suggests where the opportunities will be greatest. First, among the relatively rich. For now, the poor and lower-middle class together account for 75% of total spending. By 2025, McKinsey predicts consumption will be dominated by the middle class, to the tune of 59%, and the rich, accounting for 20%. Second, in the cities. It expects consumption in urban areas to rise from 43% of the total now to 62% by 2025—even though most Indians will still be rural.

Third, as spending on discretionary items increases, some markets will balloon faster than others. While the share of Indians' spending devoted to food, drink and tobacco will fall from 42% to 25% by 2025, health-care spending will rise from 4% to 13%.

If McKinsey's growth prediction looks reasonable, others look optimistic. For example, the report notes that spending on education and infrastructure will have to increase to support its analysis. Yet it is still hard to imagine so many hundreds of millions of Indians being educated to a standard befitting middle-income status. Transforming the thousands of rotten schools might prove impossible, even if sufficient money can be found. Given India's relatively weak fiscal position, it perhaps cannot be.

If the golden bird is to be a phoenix, and not a chicken, predictions such as these should spur the government to act on such problems. Suman Bery, director of the National Council of Applied Economic Research, a think-tank, lends a word of caution: “We've had super-fast growth only for the last four years. We can still throw it away.”

Dhotis are well underway to the path of massive Economic explosion for sure. They've been outsourcing their products at the rate of none, and if IT were possible for India's college grads to get Visa to come to the U.S. then most of the American firms would've had Indians working on them. I recall one incident about a year back when one of my buddies needed some technical help from the manufacturers of his laptop, Compaq that is. Upon calling, my friend thought that the representative was an Indian ( by accent ) and asked where she was from. As shocking as it sounds, the answer was hilarious indeed. The woman was answering and offering the technical help from Bangalore! That just went to show where India and China are headed in the years ahead. Hopefully Nepal will able to grasp something of it!

Balbhadra - Very true indeed. I think India is readying itself for could turn out to be a massive economic overhaul pretty much like China's.

"Hopefully Nepal will able to grasp something of it! "

Amen. Perhaps one way we could start, might be to not use a derogatory term like "Dhoti" - what says you? :) That's not a word that would get us business, no?

Just a thought.

:)

Me says old habits are hard to get rid of ;) But I'm always willing to acknowledge that the "dhotis" are capable of producing something that could change the fortune of all Nepalese. India and China emerging as economic giants can only bring positives to Nepal. I can already see that the Beijing - Lhasa railroad is going to have a huge economic impact on Nepal. Now if only the unrest down in the South ( terai ) were to stop....and the people started working on making Nepal a place to be...
Anyways got a final tomorrow...gotta get going...

while it does sound optimistic from urban india point of view, let's put our focus on rural india for a moment. the rural india-- a huge proportion of india-- is based on agriculture and according to what i read, food minister sharad pawar (? ) once said that the productivity in agriculture has been static for few years and, due to increasing indian population, is in fact coming down relatively. the investment in agriculture is not growing and private investment is as well coming down. the cultivation is not a profitable occupation to the farmers. unless agriculture is made profitable and rural economy grows, india, as a whole, cannot boom in economy.

and considering the fact that about 93 percent employment in india is in rural sector, a 30 percent growth in IT and other industrial sectors may contribute a mere 1 percent improvement in total employment.

so is this gonna be for real or is it just another media hype? where do we draw the line?

you may want to look into this analysis:

- http://news.indiamart.com/news-analysis/is-it-a-boom-time-in-8563.html

LooTe

whats nepal gonna grab, boooobs of Aish or honeymoon video of their marriage ?

hahah its hysterical, instead of spending nepali money inside nepal, so called PHD economists spend their money in india and they say with their big mouth nepal ohhh hhahahaha don't disturb me, i am getting some sleep.

instead of working towards better future as a country, nepal hasn't succed. why it hasn't achieved economic success cause of internal parasites sucking the economic vein of our country and they are making their bank account more stronger and stronger, and as we pepople we have done nothing. Not a single thing of action, there is no action in nepali politics.

how can be politics be intersting and awesome without some actions ? and our leaders they are scared of their own shadow.

They are worse than hen. A hen can't decide to cross a line of a circle drwan by chalk around it, but at least the hen can say in self justification that someone else's hand had drawn that circle. but they drew their formula around themselves with their own hand ano now they are gazing at the formula, but not at the reality.

i am putting the important part from the article whose link i just posted which says the same thing i wrote:

(a note of caution: the article is 3 years old and while much may have been achieved in urban front, rural india is still the same!)

To achieve consistent 7 per cent annual GDP growth, India needs to have faster agricultural growth as well as of industry and services. Agriculture needs much more public investment and we must await the budget to see whether the Government can increase it. Growth in industry and services is throttled by red tape and poor urban infrastructure, especially roads, transport, water, sanitation and power. There is little sign of honest attempts in most states and their city administrations to improve their management and find the resources for investment.

The economy has not changed since the waning days of the Vajpayee Government when India was said to be shining. It might seem to be booming today, but there are fundamental weaknesses and challenges. They range from high Government deficits, unviable enterprises, poor financial regulation, and uneconomic infrastructure pricing, ineffective delivery systems of Government, red tape, and so on. To be resolved they need politics and the Government to march in step. That they are not doing so even within the Congress, let alone its allies, is apparent. The stock markets are booming. That is no indication of a rosy future for the economy.

I wrote this for a paper a while go...may be related to the topic?

There is no doubt, huge potential exists for India's expansion. However, future growth is contingent upon several factors. There are numerous inherent inefficiencies in the Indian economic and political system and they need to work on those problems if they are to grow at the current rates of growth.
While the large surplus of workers has proved an advantage to India in the short run, it
can have negative impacts in the long run. Hence, India should reduce its high rates of
population growth. Despite the high growth rates, India would find itself locked with low
GDP per capita due to its large population size.
The growth of the industrial sector has been pretty slow compared to the services sector. India needs to expand its industrial base like that of China if it wants to capture the global market. If India makes the rules and regulations so as to facilitate foreign direct investment, it might see more manufacturing firms coming to India. So, it has to come up with policies to attract FDI as well. Currently, China receives far more in FDI than India. India has the language advantage over China and hence, it should be able to benefit from that.
It has been dependent on outsourcing of jobs a lot in the past couple of years. However,
sustainable growth isn’t possible with such a dependent economy. If the US economy
crashes down, India will suffer the brunt of it. So, while labor exports are good in the
short run, India has to be prepared to face any such possibilities.

Agriculture is still a very important part of GDP for India. Many rural Indians depend on
farm income for their livelihood. So, India should take advantage of its comparative
advantage in food production to bring up these people. Diversification should also help
increase the growth in the agricultural sector.

China has a huge market and there is a great potential for the two countries to cooperate in several fields. India should forge unity with China and work for economic benefits than think about political ends. The cooperation between these two countries is already growing but there is a lot of room for further progress.

Somehow it is hard to grasp that India will be one of the economic superpowers in couple of decades. Sure the income has risen almost hundred folds and standard of living has approached almost Western standard, but that is true only for privileged few, mostly in the IT circle in and around Bangalore and similar IT hotbeds. A stroll through a village in near Patna or even a town in Pondicherry gives a different outlook. It will take much longer for the national wealth to trickle down there. And, if I am not wrong, most of India is comprised of places like those.

This is just my whimsical thought. No scientific "merudanda" is taken into account as I am sure that McKinsey report has.

Balbhadra - Phew! At least it is in quotes this time :)

Thopa - Sure politicians and economists have a role in it all, but so does everyone else including businesses and ordinary people. I think that's where you will see the initiative and the action IMHO.

Loots - Very interesting. I guess having a better agricutural growth rate plays its part but I dont see it as the primary driver in brining people out of poverty. If you look at most major economic advances post the industrial revolution, including what is going on in China today, a lot of upward mobility has been about bringing people out of lower paying agricultural sector into the relatively higher paying manufacturing, construction and the services sectors.

Also, that 90% agriculture employment number has declined in the decades since it was that high. The numbers I have before me are more on the lines of 60% employement in agriculture (with roughly 30 % in services and 10% in industry - not sure which bucket they put construction in).

In spite of employment being skewed such, in terms of GDP services are a staggering 60% and agriculture and industry 20% each. In light of that, the game plan should be, and I think is in the mind of many planners, to increase the opportunities for people so that they can move to the higher paying sectors like services, construction and manufacuring. That is not to say agriculture can or should be ignored but agricultural growth is unlikely to be what lifts millions out of poverty. The focus in my opinion should be to wean as many people away from agriculture as possible by providing them the opportunities and acces that will help them succeed in the other sectors (namely education).

It wasn't agriculture that has brought India this far, except perhaps for a brief period during the green revolution days, and it appears it will continue to be the services and industry sectors that will drive the economy forward.That is where the future of India's masses lies IMHO.

Also, to points raised by some of the other posters, depending on which figure you look at, India's poverty rate is around 20% according to some. Others but it at 30-something. I forgot who said it but India is a rich country inhabited by the poor. Just like China was and still is to an extent today.

Lopsided development is a concern, but if you exculude the BIMAROO states( Bihar, Madhya Pradesh, Rajastan, Orissa, and now Chattisgarh and Jharkhand) - there is a mixed - almost decent - economic picture in India. Take the example of Tamil Nadu where close to half the population is urban. South India has become a great place to do business and has been attracting foreign investment and indusrty at a very impressive rate and in the process has seen some of the biggest GSP (gross state product) jumps in the country.

Where India does suffer, according to many reports, is in personal productivity. I expect that will change with time and I have already seen it in my own work as Indian employees connect with rest of the world, especially the western world, learn it's ways, and learn the things that they need to do to get more US and European business namely be more productive.

In terms of the big picture, I think the key for India is to focus on better human resource development and continue to see grow in all sectors of the economy with tthe focus on that sector where it has the most cometetive advantage against others: low cost services. At least that's where the medium term focus should be.

Just my thoughts.

Be ware! All that glitters is not Gold.
Let's probe under the projected layers of data, and test its accuracy & consistency. Does it faithfully convey the ground realities?
Montek Singh Ahluwalia, too, doubts the validity of data which is being supplied to his Apex Planning body.
There is a boom in consumer-goods industry only, and the same is supported by bank-loans--not with real savings.
Of course, there is investment in buildings and roads--funded either by the Government or through bank-loans (e.g. housing loans) or, in rare cases, financed by the private players (e.g. toll-ways & bridges).
More about it later.

Caps,
I am not trying to argue with McKinsey's prediction nor i differ with most of what you said, however, i wanted to keep general readers here aware of some of the issues, challenges and priorities that india have to go through before they come close to what these predictions say. in other words, your article is pointing out the rosy result (economic boom) and i am trying to project the changes at status quo that india have to undergo before they can see that result coming through. and all in all, i don't see it as a piece of cake :P

on that note, let me point out some of the things that are needed to be done as far as materializing the economic prediction is concerned.

1) check the growth of population. looking at what china did to revolutionize and move the country from agriculture base to industry base, india need more time and labor than china for the same. let's look at the per capita income for indians -- it's still very poor in spite of all the hoopla about economic boom!

2) allow foreign investments in more areas, not just in computer/telecom related fields and for that simplify the process for entering into business. this is very important as per foreign investment is concerned. bureaucracy needs to be reformed along with social reformation.

3) boost agricultural growth through diversification and development of agro-processing.
agriculture should be made profitable. i am saying this, because a complete transition from agriculture to industry is not easy for a huge and densely populated country like india which has abundant rural regions.

5) develop world-class infrastructure. expand industry fast enough to integrate not only the surplus labor in agriculture but also the unprecedented number of women and teenagers joining the labor force every year in india.

6) lastly but most importantly, imparting education and providing quality health care to the people. there is a HUGE difference in that between rural and urban india. need to reduce the gap.

phew! i am being a bit optimistic for india here, to say the least :P

ARRRRRRGGGGGG~

few typos are there. typed everything in a real hurry. please bear with me. :-(

nity nite folks!

Mr captain, i was not saying only politician are responsible factors for economic growth, but what i was also saying is yeah india is grabing some sweet grapes at the moment but what is nepal doing being situated between these two giants who gonna crush the world of US sole powerful economy, where are we economically and politically. Every citizen of a country tries to gain economic sucess through political means, and what is happening in nepal, intra conflict. policy of politic depends upon economic success.

so i was giving the example of hen in the current political atmosphere in nepal. So, again the question remains where are we ? are we walking to the right path as a nation towards the sucess. Only history will tell us.

Nepal is missing out on great oppurtunity. Thanks to worst kind of politics being played.
I bet after sometime the developed countries will try to shut down investments into devloping countries in order to retain supremacy. The boom is not for ever. Even african countries are making double digit growth.

Dhotis and their media are really good in bullshitting.. ; u can see lots of news these days like " india will be super power in 50 years, india will be this and that after 20 years" but reality is infrastructure really sucks.. and their attitude is crap..

They can do it, they have skill and manpower and resources.. dhotis are learning from china's rapid success but it will take time. With the attitude of dhotis, and "democratic, corrupt and slow" political system in India; I do not think they can do it as fast as china..
and it wont happen in our lifetime..

Furthermore, if there is big climate change as predicted : indians and india's economy will suffer.; its predicted that due to glacier melt, Ganges volume will be reduced by 30 percent in next couple of decades.. this will have direct impact on 400 million dhotis who rely on Ganges for irrigration and drinking water.. dhotis will then suffer big time..

Heard that dhotis, when they travel to china, they get so amazed that they go numb for weeks.-... hahaha remember that India and china were on the same level in 70's: now china's GDP is probably many times bigger than doties.. shangais areas GDP is equivalent to half of indias GDP..

KajiRaja.

Stop giving consolation to yourself by pointing out faults in indian development. Think about nepal.

Nepal is in deep shit.. everybody knows that.. nothing can be done, until we remove a whole generation of politicians..

yusuf_aalam , are u a dhoti ?

developed countries will lick china and india.. until there is money to be made..

india and china is huge huge market.. without their market and cheap human resources , developed countries themself will be a poor country.. if EU and US can not sell their products to india and china.. , think of planes, cars, militiary equipments.. who will buy them.. ?