A $10-trillion bet on China and India

Published on Sunday, 02 December 2012 15:24

Written by Michael J. Silverstein

WHEN it comes to China and India, we at The Boston Consulting Group urge you to bet in favor of both.

The Organization for Economic Cooperation and Development (OECD) recently released a report predicting that China’s economy would rebound and grow 8.5 percent in 2013 and 8.9 percent in 2014, citing increasing consumer demand and government spending on housing and infrastructure. The OECD report also expressed some optimism that India’s economy would resume growth over the next two years, and that its current-account deficit issues would soon be addressed.

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In our new book,  e $10 Trillion Prize: Captivating the Newly Affluent in China and India, my co-authors and I posit that growth in China and India won’t occur along a straight line, and that both countries have to overcome corruption, imprudent investments, social disharmony and natural disasters. But our book’s primary thesis is that the economies of China and India will continue to grow at a compound annual growth rate of at least 8 percent through the end of the decade, and that annual consumer spending in the two countries combined will therefore reach $10 trillion by 2020.

As we ponder the next decade, we believe that the ambition and energy of the billion newly affluent in India and China will prevail. 

Our book offers a manifesto for growth and wealth creation. We have spent enough time in Chinese and Indian living rooms to understand the middle class’s needs and desires. This population will become increasingly intolerant of corruption and pollution, and increasingly willing to invest in health and education. They will use the power of their purse to carve out a world worthy of their hopes and dreams.

This enormous consumer-driven growth will lead to equally massive infrastructure projects involving transportation, telecommunications, power, health care and education.

We urge investors to keep the faith and press forward in China and India. Positive forecasts may be knocked off course by economic downturns, natural disasters and political unrest. But as we show in our book, Chinese and Indian entrepreneurs and executives understand precisely what’s happening. They’ve witnessed tremendous new government investments in infrastructure and see hundreds of millions of new middle-class consumers eager to spend. Some of these entrepreneurs confidently predict that their businesses could grow by a factor of 10 in the next 10 years. We believe Western companies could—and should—be growing with them.

Michael J. Silverstein is a senior partner and fellow at The Boston Consulting Group. His most recent book is The $10 Trillion Prize: Captivating the Newly Affluent in China and India.