ESSENTIALS FOR LEADERS AND THOSE THEY LEAD

Few global companies can afford to ignore the growing importance of India. As the world’s fifth-largest economy, with a rapidly expanding middle class and one of the largest consumer markets in the world, India presents promising opportunities in almost every sector, from chemicals to healthcare to fashion. But many challenges remain. In a new article on India—part of our McKinsey Explainers series—we discuss seven factors shaping the country, and this week, we explore some of these trends in depth.

AN IDEA

Corporate growth can power economic inclusion

Indian companies could play a critical role in advancing the country toward economic inclusion, according to McKinsey research. An estimated 77 percent of Indians live below the economic empowerment line, which we define as having the means to meet the full range of essential needs and begin attaining economic security. In our analysis of the performance of 837 Indian publicly traded companies between 2012 and 2022, we found that one in every five companies doubled their revenue every five years and quadrupled it in ten, achieving revenue growth of 15 percent or more, compounded annually. This vigorous expansion can catalyze India’s GDP growth, especially if other companies follow the leaders and accelerate their core businesses through digital technology and data, agile resource reallocation, and investing in leadership capabilities.

A BIG NUMBER

$600 billion

That’s the amount that agriculture could contribute to India’s GDP by 2030—if the country can ramp up modern farming techniques with agricultural technology, or agtech. In 2022, venture capitalists invested more than $1.2 billion in Indian agtech companies, a 50 percent increase from the previous year and triple the investment made in 2020. But investors in Indian agtech may want to consider some basic issues first, suggest McKinsey senior partner Avinash Goyal and colleagues. For example, it’s important for the agtech to have both physical and digital infrastructure, as most farming households still prefer physical touchpoints for digital support, such as tutorials and ground visits to help with app installation.

A QUOTE

“Indian start-ups and founders should learn how to think big and understand that the opportunity is really big.”

That’s Girish Mathrubootham, who—as the cofounder and CEO of Freshworks—steered his company to a first-ever feat for an India-born software-as-a-service firm: an IPO on a US stock exchange and a valuation of $10.1 billion. “I have seen so many promising start-ups take the quick route out and jump the moment something comes their way that allows them to take an exit,” he says in a discussion with McKinsey senior partner Noshir Kaka. Mathrubootham credits the success of Freshworks to a “heart-led” leadership approach that “focuses on putting humans first, over business motives, and doing the right thing by them.” His advice to entrepreneurs: “Do the right things in a responsible way, without taking shortcuts to growth.”

A SPOTLIGHT INTERVIEW

Investors used to balk at the lack of adequate exits and options in India. But the market has changed, says Amit Dixit, Blackstone Private Equity’s head of Asia, in a conversation with McKinsey senior partner Vivek Pandit. “You don’t have to put your head in the storm,” says Dixit. “We tend to be long-term investors and don’t have to either invest or exit anything right away.” One of Blackstone’s most effective strategies in India is to partner and align closely with stakeholders. “We’re ensuring that the right people, with the right alignment, are in critical leadership roles in our companies,” Dixit says. “And when I say ‘leadership role,’ I don’t mean just the CEO or CFO. Typically, our management teams have equity programs extending to 150 to 200 people. We have recognized the power of ownership and brought that equity ownership culture into the Indian management teams, and that’s worked well.”

— Edited by Rama Ramaswami, senior editor, New York

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