Executives in India are consistently the world's most optimistic about their country's economic prospects, McKinsey research shows.
The economic boom that has lifted India's growth rates has also buoyed the spirits of executives based in the country. Research conducted by The McKinsey Quarterly over the past four years highlights just how much more optimistic they are than their global counterparts. Each quarter since 2004 McKinsey Global Surveys have explored the views of executives on their country's economy and their expectations for the workforce.1 Executives around the world have consistently been somewhat more optimistic than not about future economic conditions. Those in India have been far more optimistic—with as much as a 30-percentage-point spread between those who expect economic improvement every quarter and those who don't.
Such optimism is not unfounded. Since India began a major reform effort, in 1991, the country has moved away from the dismal growth rates that had plagued it since independence 60 years ago. GDP has grown at more than 8 percent over the past 3 years, hitting 9.4 percent in the most recent fiscal year. This robust economy has lifted hundreds of millions of people out of poverty. In addition, India is now home to world-class companies not only in IT services but also in the automotive, steel, and telecommunications industries. Research by the McKinsey Global Institute indicates that the country's middle class will continue to grow, accounting for more than 40 percent of the population by 2025,2 compared with about 5 percent today.
Over the past two years, more than 75 percent of executives in India have expected their country's economy to improve each time they were surveyed—almost twice as many as in the rest of the world, with one exception3 (Exhibit 1). Executives in India are equally upbeat about the possibility of inflation in their country: fewer than 40 percent expect higher inflation in the medium term, a proportion lower than that in any other part of the world
The relatively few executives in India who expect inflation to change differ from their counterparts elsewhere about what will cause it (Exhibit 3). While nearly two-thirds of executives in the rest of the world cite oil and gas costs as the top concern, respondents in India and China focus on changes in the level of demand for goods and services and in currency exchange rates—no doubt because of these countries' export-driven economies. However, compared with executives in India, a far greater share of those in China fears that the availability of raw materials will affect their inflation rate.
Executives in India have been consistently bullish not only on the nation's economy but also on prospects for their industries. That confidence is apparent in executives' hiring plans: those at companies headquartered in India have been persistently the most likely to hire (Exhibit 4). In the most recent survey almost a third said they were planning to hire abroad, mostly for positions that will help them to take advantage of new market opportunities—perhaps a reflection of the increasing sophistication and global expansion plans of companies headquartered in India. Resource- Mckinsey
