18 growth arenas McKinsey says could fuel India's global rise by 2040

India's 18 future arenas - from EVs and semiconductors to AI and space - could drive 30% of its GDP growth by 2040, making the country a global hub for innovation, tech, and industrial leadership

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India could add up to $2 trillion in new revenue by 2030 and double its share of global output to 8–10 per cent by 2040, if it successfully develops 18 “arenas of the future” identified in a new McKinsey & Company report, ‘India’s future arenas: Engines of growth and dynamism’. 

India’s weight in the world economy has already climbed from 1.9 per cent in 2008 to 3.4 per cent in 2023. McKinsey’s modelling shows the 18 high-'growth arenas, ranging from transformative sectors distinguished by rapid innovation, to heavy investment and large addressable markets, to supply about 30 per cent of India’s incremental GDP through 2040.         

“Together, the arenas represent powerful focus areas for India’s next economic leap as they could capture approximately 30 per cent of India’s incremental GDP by 2040. Although precise trajectories are difficult to forecast, breakthroughs in these arenas could propel India toward its aspiration of global economic leadership,” said Rajat Dhawan, India managing partner at McKinsey & Company.

 

Nine global arenas (Targeting global markets)

1. Electric vehicles and batteries

India can become a global hub for battery cell manufacturing and recycling, with domestic demand expected to rise 15-fold by 2040.

 

2. Semiconductors

With a $10 billion incentive package, India is pushing to move beyond chip design into fabrication and assembly, reducing import dependency.

 

3. Ecommerce

Online retail is set to grow to 15-17 per cent of total retail by 2030, with quick and social commerce accounting for 25 per cent in some categories.

 

4. Cybersecurity

As India manages more global IT infrastructure, its share of cybersecurity spend could grow to 4-6 per cent of global IT budgets by 2030.

 

5. Cloud services

India’s data centre capacity is growing at a 26 per cent CAGR, backed by $5.7 billion in investments, enabling it to serve global cloud demand.

 

6. AI Software and services

With a strong AI talent pool, India could generate $14 billion in revenue from generative and agentic AI by 2030.

 

7. Robotics

Increasing adoption in manufacturing and warehousing could double India’s robot density in the next five years.

 

8. Nuclear fission

India is targeting a 12x increase in nuclear capacity to 100 GW by 2047, with focus on fast breeder reactors (FBRs) and small modular reactors (SMRs).

 

9. Space

India aims to capture 8 per cent of the global space economy by 2033, with over 200 startups and $450 million in investments from 2021–24. 

  Nine national arenas (focusing on India’s self-reliance)

1. Medical devices

India’s medical devices industry is growing at 12-15 per cent CAGR, with increasing local manufacturing and export potential.

 

2. Biopharma

Biopharma represents only 15-20 per cent of India’s pharma sector (vs 50 per cent globally), highlighting significant room to grow in biologics and vaccines.

 

3. Auto components

Electrification and improved quality have helped India shift from a $2.5 billion trade deficit (2019) to a $300 million surplus (2024).

 

4. Renewables with storage

India aims for 500 GW of renewable energy, with battery energy storage systems (BESS) expected to meet around 35 per cent of demand.

 

5. Aerospace and defence

Defence imports have dropped to 35 per cent, with the market projected at $40–50 billion by 2030 and exports to reach $6 billion by 2029–30.

 

6. Bio-to-X (biomass-based chemicals)

India’s competitive sugar- and corn-based feedstocks position it well to produce bioethanol and biochemicals like bio-BDO.

 

7. Urban construction

A 10 million unit housing shortfall and projected 600 million urban population by 2030 are driving demand for smart and affordable construction.

 

8. Travel and tourism

This $170 billion sector is growing at 12-14 per cent CAGR, with outbound Indian tourist spend expected to hit $89 billion by 2027.

 

9. Industrial electronics

A $101 billion market driven by automation and power electronics, though India still relies heavily on imports.

 

A differentiated playbook for each sector

“The 18 arenas were arrived at based on three core ingredients — potential for technological or business model step change, escalatory investment dynamics and a large and growing addressable market. Each arena represents a certain strategic position for India, contingent upon the extent of India’s capabilities and the market focus on either India alone or on broader world markets, thereby requiring a differentiated playbook to win,” said Bhavesh Mittal, partner, McKinsey & Company. 

The report urges policymakers and businesses to tailor policy, capital and talent strategies to the maturity and competitive context of each arena. While the road to 2040 is uncertain, the firm argues that India has a “tangible and urgent” opportunity to accelerate domestic transformation and stake out global leadership in select sectors if it acts now.