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A new McKinsey Global Institute (MGI) report identifies a dozen technologies, ranging from the mobile Internet to cloud computing to advanced genomics, which could have a combined economic impact of $550 billion to $1 trillion a year in 2025. The selection of the 12 technologies for India was based on a similar process established by MGI's earlier work on disruptive technologies.
For India, we used additional criteria to identify the technologies that would have a direct impact on the country's economic and social challenges in the coming decade. As a result, we include technologies such as electronic payments, which are well established in other parts of the world but not well developed in India. By 2025, however, electronic payments could help 300 million Indians join the country's financial system.We group the 12 technologies into three areas: digitizing life and work, smart physical systems, and energy technologies:
digitizing life and work—the mobile Internet, the cloud, the automation of knowledge work, digital payments, and verifiable digital identity
smart physical systems—the Internet of Things, intelligent transportation and distribution systems, advanced geographic information systems (GIS), and next-generation genomics
energy—unconventional oil and gas (horizontal drilling and hydraulic fracturing), renewable energy, and advanced energy storage
Each of these technologies has the potential for rapid adoption in India between now and 2025 (exhibit).
To assess the potential impact of the 12 technologies on the economy of India and the lives of its people, we sized more than 40 applications in six sectors of the economy: financial services, education and skills, healthcare, agriculture and food, energy, and infrastructure. In the case of the government sector, we analyzed the potential contribution of e-governance initiatives, such as open data and data-driven planning and other smart city applications, but did not estimate their economic impact. Often, these technologies are used in combination, providing a greater impact than any one of them alone. For example, Internet of Things sensors in medical devices can be used together with the mobile Internet and intelligent systems (the automation of knowledge work) hosted on the cloud to monitor patients with chronic diseases remotely and to alert medical workers automatically when the system detects a potentially dangerous situation.
The total impact of the sized applications could amount to $240 billion to $500 billion a year by 2025. Given the contributions of these sectors to India's GDP, we estimate that across the entire economy, the 12 technologies could have a combined economic impact of $550 billion to $1 trillion by 2025.
Financial services. The applications we size could have an economic value of $32 billion to $140 billion a year by 2025. That value arises from improved productivity and higher incomes for citizens using financial services and from lower costs and reduced leakage in government transfers and payments. As many as 300 million Indians could gain access to banking services and raise their incomes by 5 to 30 percent thanks to better access to credit and the ability to save and make remittances.
Education and skills. We estimate that remote learning, massive open online courses (MOOCs), and other digital systems could have an economic impact of $60 billion to $90 billion a year by 2025 thanks to higher productivity among a larger number of skilled workers. India could have about 24 million more high-school and college-educated workers and 18 million to 33 million more vocationally trained workers by 2025 as a result of digitization in the education sector.
Healthcare. Disruptive technologies could transform the delivery of public health by 2025 through remote health services and digitally enabled healthcare workers, who can tap expert systems to conduct basic protocols via smartphones and the mobile Internet. By 2025, the total economic impact could be $25 billion to $65 billion a year, including $15 billion that could be saved through systems to reduce the problem of counterfeit drugs. Some 400 million of India's poor could get access to better care through technologies that bring medical expertise to modestly skilled health workers in remote areas.
Agriculture and food. Technology applications could create $45 billion to $80 billion a year in additional value in the sector. More than half of that would come from hybrid and genetically modified crops, precision farming (using sensors and GIS-based soil, weather, and water data to guide farming decisions), and mobile Internet–based farm-extension and market-information services. Electronic payments and other digital systems, for example, could reduce leakage in the public food-distribution system, and the use of real-time market data and other information tools would cut postharvest food losses. These improvements could raise the incomes of as many as 100 million farmers and bring better nutrition to 300 million to 400 million consumers.
Energy. Collectively, the technology applications we size in energy could have an economic value of $50 billion to $95 billion a year by 2025, including the impact of the carbon emissions avoided. The largest benefit would come from smart metering, which could save $15 billion to $20 billion a year by 2025 in reduced transmission losses. Unconventional-oil and -gas development might generate value of $10 billion a year by 2025.
Infrastructure. India has a widely acknowledged infrastructure deficit that successive governments have attempted to address. Smart highway systems and electronic tolling can reduce road-travel times by 10 to 15 percent. Radio-frequency identification (RFID) tags and other tracking technologies can raise the efficiency of ports and warehouses by 50 percent. Sensors could help reduce water-system leakage by 15 to 20 percent. In construction, modern methods such as the use of pre-cast parts and project-management systems could help save $12 billion to $18 billion a year in costs by 2025 and help India build ten million affordable homes. Together, infrastructure technologies can contribute $30 billion to $45 billion a year in value by 2025.
Government services. India has made a good start with its national e-governance plan, but it can take additional steps to capture the full potential of technology over the next decade. Reengineering core government processes to simplify them and integrating multiple services on technology platforms are important next steps. Government can also help new businesses and business models prosper through its open-data initiatives. In addition, it can help accelerate the build-out of fiber-optic backbones, which will be critical for spreading the mobile Internet—itself the foundation for many applications in other sectors of the economy.
To capture the full potential value of these technologies, India will need to address barriers such as its limited telecom infrastructure and a lack of computer literacy among Indians. In addition, policy makers can create an environment in which these technologies flourish by adopting appropriate regulations that protect the rights of citizens and by helping to foster an environment for innovation. Government can encourage the growth of tech industries and applications by supporting efforts to create standards and can help entrepreneurs scale up ideas into major companies through reforms to regulatory systems. Finally, India can raise its investment in research and development, which in 2010 was 0.87 percent of GDP, compared with 1.7 percent in China and 3.36 percent in South Korea.
ABOUT THE AUTHOR(S)
Noshir Kaka is a director in McKinsey’s Mumbai office; Anu Madgavkar is a senior fellow at the McKinsey Global Institute, where James Manyika is a director; Jacques Bughin is a director in the Brussels office; and Pradeep Parameswaran is a principal in the Delhi office.
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