Mumbai: By 2020, India, China and the US will jointly contribute $1 trillion to the global economy, according to Foresight 2020, a study conducted by the Economist Intelligence Unit (EIU) and sponsored by Cisco Systems. The next 15 years will see the powerhouses of India and China outpacing the rest of the world in gross domestic product (GDP), wages and consuming power. India will contribute 12.2 per cent to global economic growth by 2020.
The study projects the continued rapid growth of India as one of the fastest growing economies. By 2020, India, as a trading nation will record the biggest jump in global rankings - from 24th to 10th. Propelled by fast growth in India and China, Asia will increase its slice of the world's GDP from 35 per cent in 2005 to 43 per cent by 2020. India's share in the global GDP will rise from 6.2 per cent in 2005 to 8.8 per cent in 2020.
Developing Asia will account for two-thirds of the increase in employment growth, with India alone making up 30 per cent of the net increase in global employment with 142 million new jobs.
Global consumer spending will expand at an annual rate of 5.6 per cent to $62 trillion by 2020 compared to $27 trillion today. Though US will continue to be the largest consumer market, China will emerge as the world's second-largest consumer market and India will rival the bigger European markets. India's share in world consumer spending will increase from 1.9 per cent in 2005 to 3.1 per cent in 2020.
India's growing integration with the global economy and its favourable demographics are likely to ensure a sustained rate of growth of 5.9 per cent a year in 2006-20. India's democracy is well entrenched; its legal system is generally impartial, if slow moving, and its constitution is respected. However, India's much-discussed IT sector accounts for too small a share of GDP to be a long-term driver of growth. Much more will depend on the modernisation of the country's agriculture and manufacturing.
Specifically, the study found that tailored customer experiences will play a critical role in economic success. Companies will differentiate themselves and create competitive advantage by creating high touch customer experiences through customisation of products and quality of customer services.
"The rapid growth of India as reflected in this survey is already apparent in the evolving and complex needs of our customers in the Indian market," says Ranajoy Punja, vice president, marketing, Cisco Systems. "As production processes and transactions become more commoditised and automated, value with customers lies in hard-to-replicate personal relationships and interactions. These interactions will be heightened by collaboration, high-value services and knowledge workers all enabled by technology."
"Knowledge workers combined with IT can change customer experiences. Companies that can collaborate globally to create the customer experience will win the competitive battleground."
The EIU surveyed 1,656 people, nearly a third of who were executives, from 100 countries from Asia-Pacific (30 per cent), Western and Eastern Europe (34 per cent) and North America (27 per cent). EIU conducted in-depth interviews with executives, analysts and policy makers in late 2005.
Highlights of Foresight 2020:
Economic growth is expected to remain robust over the next 15 years with India, China and the United States accounting for more than 50 percent of all new growth. Overall, both India and China's GDP will grow at an annual rate of 6.0 per cent.
471 million net new workers will enter the global workforce, with India accounting for a remarkable 142.4 million, followed by China with 65 million and the United States with 12.5 million new workers. The European Union (EU) will experience a growth of 8.4 million workers. The overwhelming majority of new US and EU jobs will be in the service industry.
By 2020 China's GDP (at PPP) will have matched the US and the EU. India's GDP will have overtaken or be on the threshold of overtaking the biggest European economies. But most of Asia - including both China and India - remain very much developing countries in 2020. Average GDP per head will still be less than one-fifth that of the US, compared with one seventh in 2005.
From being the manufacturing centre of the world, about 66 per cent of those surveyed believed the Asia Pacific region would see its workers evolving to knowledge workers - occupying complex, knowledge-based roles that required developed communication and judgment skills. In order to groom employees to occupy such roles, those surveyed said they would most likely use training (38 per cent) and IT (41 per cent).
While price and quality will continue to matter, more than 90 percent of those surveyed believe the importance of the personalisation of services will increase dramatically as interactions and customisation become vital components of both customer service and worker behaviour.
The nature of the workforce will continue to change. 56 per cent of executives in Asia Pacific expect more efficient organisations in which independent decision-making and collaborative environments will be the norm. These changes will require a new approach to organisational management and human relations. Customers and suppliers will become more involved in product development, cross functional and cross border teams will work together more frequently and partnerships with other organisations will proliferate.
The Foresight 2020 study was conducted in late 2005 in order to understand long-term demographic, economic and corporate trends and assess likely changes to the global economy. The study covered eight key industries - automotive, consumer goods & retailing, energy, financial services, healthcare and pharmaceuticals, manufacturing, public sector and telecoms.