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India’s Economic Hotspots

MUMBAI – India’s economy could soon be on the move again. The new government is re-establishing fiscal discipline and energizing the bureaucracy, fueling optimism that rising business confidence will re-activate investment, particularly in infrastructure. But India’s overall growth prospects conceal a patchwork of economic opportunities that exist within states, districts, cities, and even towns – opportunities that companies can uncover only with careful research.

India’s economic data are promising. Annual average GDP growth is forecast to range from 6.4% to 7.7% until 2025. This compares favorably with last year’s 4.7% rate, and is close to the 7.7% average recorded in the decade up to 2012. Moreover, it contrasts sharply with the expectations of secular stagnation in the developed world. This acceleration would place India among the world’s fastest-growing large economies and increase the number of Indian consumers who can afford discretionary items from 27 million in 2012 to 89 million in 2025.

But the potential is far from uniform. According to a new report, more than half of India’s GDP growth between now and 2025 will come from just eight states (Gujarat, Haryana, Himachal Pradesh, Kerala, Maharashtra, Tamil Nadu, Andhra Pradesh, and Uttarakhand), home to just 31% of the country’s population. Along with four dynamic city-states (New Delhi, Goa, Chandigarh, and Pondicherry), these states will be home to 50 million consumers, or 57% of the country’s middle-class households.

Indeed, per capita GDP in India’s highest-performing regions could grow to twice the national level. This reflects several factors, including rapid urbanization, sustained investment in skills and infrastructure, and a shift from agriculture to industries such as automotive components, petrochemicals, pharmaceuticals, financial, and IT-enabled services.