Rapid urbanisation is expected to create another 15 metropolitan cities over the next decade. By 2025, India’s 69 metropolitan cities, combined with their hinterlands, will generate over half its incremental GDP between 2012 and 2025, and just over half of its incremental consuming class households, according to a report by Global Consultancy firm McKinsey & Company.
The report titled ‘India’s Economic Geography in 2025: States, Clusters and Cities’, which asserts that a granular understanding of India’s market potential and strategies tailored for the same will help companies emerge winners, has identified key economic and business growth hotspots for the period up to 2025 after analysing 29 Indian States and 7 Union Territories in the country. The emerging cities include Jamnagar, Dehradun, Cuttak, Bhavnagar, Kolhapur, Vellore, Amaravati, Ajmer, Udaipur, Sangli, Nanded and Mangalore.
The report has also defined metropolitan clusters as groups of districts that have high economic potential are contiguous such that each cluster represents a serviceable market, and have a metropolitan district as the nucleus. Example: The Nagpur cluster and Kolkata cluster, for example extend beyond the metropolitan districts that they stretch across and include the adjacent five and six districts respectively.
With those parameters, it has identified 49 metropolitan clusters spread across the country.
These clusters are expected to account for about 77 per cent of incremental GDP by 2025.
Thus, the 69 metropolitan cities (cities with a population of over one million) and their hinterlands (that account for more than half of India’s incremental GDP growth by 2025), or the 49 metropolitan clusters (that represent almost three-quarters of India’s future income pool) are attractive growth pockets.
Top quartile metropolitan districts will have an average annual per capita income of Rs.3.47 lakh — four times that of India’s — and account for 20 per cent of the country’s consuming class households.
“Tailoring strategies to the specific needs of customers in these clusters can provide companies with a significant competitive advantage, particularly in consumer oriented industries such as cosmetics, sanitary ware, building products, apparel, telecom and financial services,” it said adding “Companies in India that have adopted a granular approach to identifying growth markets have been rewarded.”
The McKinsey report has also classified the states into four-broad groups for future growth potential. Chandigarh, Delhi, Goa and Puducherry have been termed as ‘Very High Performing’ states. Eight states such as Gujarat, Haryana, Himachal Pradesh, Kerala, Maharashtra, Punjab, Tamil Nadu and Uttarakhand have been rated as the ‘High Performing’ states, which are likely to account for 52 per cent of India’s incremental GDP growth from 2012 to 2015.
The report stated that Gujarat has multiple growth engines, led by manufacturing for its fast pace of growth, while Tamil Nadu has a strong services sector and knowledge-intensive industries.
Another 12 states that include Andhra Pradesh, Karnataka, Rajasthan, Chhattisgarh, Jammu & Kashmir, West Bengal, and Odisha are classified under ‘Performing’ states.
Finally, North Eastern States, Bihar, Madhya Pradesh, Uttar Pradesh and Jharkhand are likely to remain ‘Low performing’ states in 2025. But the report said that Bihar and Madhya Pradesh could achieve faster growth by fixing the basics.
The report estimates that India would be 38 per cent urbanised by 2025, up from 31 per cent in 2011. Eight states – TN, Maharashtra, Gujarat, Kerala, Delhi, Chandigarh, Goa and Puducherry – would have urbanisation level of over 55 per cent by 2025.
