India’s future arenas: Engines of growth and dynamism

India is on a strong growth trajectory, with its share of global GDP rising from 1.9 percent in 2008 to 3.4 percent in 2023.¹Analysis using World Bank data. The Government of India is now targeting an 8 to 10 percent share of global GDP by 2040.²Charan Singh, “How India can achieve rapid growth to achieve ‘Viksit Bharat 2047’ goal?” Business Standard, February 9, 2025. Achieving this level of growth requires a shift from incremental progress to targeted breakthroughs in sectors that hold the potential for significant growth and dynamism—what the McKinsey Global Institute defines as “arenas” (see sidebar, “The next big arenas of competition”).

The business landscape of India, like the country itself, is constantly evolving. Many companies are poised to build and harness their capabilities at this dynamic time. We explored which sectors could experience significant growth, technological advancements, and sustained investment dynamics to identify the transformative sectors for India, and 18 arenas emerged. Nine of these are global arenas where Indian companies could attain disproportionate growth through distinctly Indian capabilities. The other nine are what we define as “national” arenas, or sectors that could advance long-term strategic interests and fuel growth in a uniquely India-specific context. This mix of global and national arenas could play a pivotal role in realizing India’s vision of becoming a developed economy by 2047.

Unlocking the value in these arenas will call for cross-sector collaboration, decisive action by Indian companies, and supportive policies. This article focuses on these 18 arenas for India, breaks down the opportunity in each, and offers ideas on ways Indian businesses could pursue value creation.

The arenas for India

While Indian enterprises played a relatively limited role in shaping global arenas from 2005 to 2020, they could contribute more meaningfully to the arenas of the future. A comprehensive analysis of rapidly evolving large-scale sectors and India’s inherent strengths, capabilities, and strategic priorities led us to identify 18 arenas that could generate $1.7 trillion to $2 trillion in revenues for India by 2030, up from $690 billion in 2023 (Exhibit 1). They could help capture approximately 30 percent of the incremental GDP by 2040 (Exhibit 2).

Driving the transformation from sectors to arenas

What could transform a sector into an arena? The potential for transformation comes from three drivers: step changes in technology or business models, high and sustained investment dynamics, and cultivation of a large and growing addressable market.

Substantial innovation unlocks new performance curves in a sector, prompting technology or business model step changes, often indicated by increased patent activity or R&D activity. We selected sectors where patent activity exceeded twice the median (Exhibit 3) or where R&D investment outpaced the national average by a factor of two (Exhibit 4).

Sustained high investments in sectors increase output and enhance production functions. To identify investment momentum within sectors, we looked for signals of investor confidence (Exhibit 5) such as sustained private-equity and venture capital inflows exceeding $1 billion or growth in investments surpassing a 15 percent compound annual growth rate (CAGR). We also tracked public-sector commitments, where government investments in capital infrastructure or innovation indicated potential strategic bets on the sector’s future (Exhibit 6). Finally, we paid close attention to the moves of India’s large conglomerates, on the premise that substantial long-term investments by industry leaders signal their interest and belief in the sector’s transformative potential.

Growing sectors where demand outstrips the rest of the economy could be unlocked through technological or business model step changes and sustained high investments. These sectors could also displace the share of an existing large market with a superior product or service. To pinpoint these, we focused on sectors where scale met momentum: market sizes exceeding $3 billion and growing at a CAGR of over 12 percent (Exhibit 7), that are sizable and accelerating, indicating their current relevance and their potential.

Eighteen sectors matched the three drivers of arena creation, standing out as engines of growth and dynamism. These emerge as our 18 arenas that can shape greater economic growth for India.

The four archetypes of opportunity for India

These 18 arenas could shape and accelerate India’s journey toward global economic leadership. 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 (Exhibit 8). This position determines the nature or broad archetype of the opportunity ahead:

1. Build for India. Players in nascent-capability arenas focused largely on India can lay down foundational blocks on which to build national growth. Enhancing capabilities in semiconductors, industrial electronics, robotics, and nuclear fission could help India to achieve self-reliance.
2. Pursue accelerated scale up. In arenas combining a primarily national focus with strong capabilities, players can pursue accelerated scale-up in India’s long-term strategic priorities in renewables with storage, e-commerce, cloud services, travel and tourism, and urban construction.
3. Build global competitiveness. In arenas combining a broad market focus with somewhat nascent capability, players can strengthen emerging capabilities to target Indian and world markets in electric vehicles and batteries, medical devices, biopharma, aerospace and defense, and bio-to-x.
4. Achieve global leadership. Where a broad market focus is combined with relatively strong capability, players would use distinctive capabilities to capture a substantial portion of Indian and global markets for auto components, space, AI software and services, and cybersecurity.

A playbook for India to capture value in the arenas

India must build on its strong fundamentals, young population, and ongoing structural reforms to sustain GDP growth of 8.0 to 8.5 percent over the next two decades. Indian companies could shape a dynamic market and unlock the full potential of the 18 arenas through adopting a differentiated playbook for each archetype of opportunity. Some potential ideas of what that playbook could look like appear below:

• Build for India by providing domestic players with patient capital, export-linked incentives, and long-term demand visibility. Modular and open ecosystems can facilitate collaboration among design and manufacturing players in component-heavy sectors such as electronics and power. Applied R&D to address India-specific challenges, through industry-academia consortia, could be incentivized by linking outcomes to commercialization and intellectual-property.
• Pursue accelerated scale-up by investing in infrastructure across logistics, power, and digital connectivity to unlock demand and improve unit economics in sectors like e-commerce, renewables, and tourism. Bundled, arena-specific fast-track mechanisms—such as license clearances, land, and infrastructure access—could accelerate scale. These strategies could be even more effective through the mobilization of institutional and retail capital through real-estate investment trusts, infrastructure investment trusts, and IPO pipelines for high-growth infrastructure and technology projects.
• Build global competitiveness by establishing national-scale innovation platforms in emerging sectors such as EVs, biopharma, and aerospace, and by anchoring public–private programs using pooled capital, sandbox regulations, and targeted intellectual property (IP) incentives. The strategic focus could extend beyond FDIs to attract frontier partnerships and sovereign venture funds by creating joint labs and co-development models driven by global expertise. Government procurement policies designed to anchor demand and stimulate domestic industrial depth—for example, defense offsets, public health systems, and battery standards—could help accelerate the growth of these sectors.
• Achieve global leadership by fostering dominant IP-led models and offering targeted incentives for product development and export enablement. Investing in digital infrastructure, engaging with global standard-setting bodies to shape industry-wide frameworks, and enhancing workforce skills (specific to relevant arenas) in tier-two and tier-three cities could contribute to expanded capacity, improved delivery, and enhanced resilience.

India is at a pivotal juncture in its economic development, with the potential to capture 8 to 10 percent of global GDP by 2040. Achieving this potential will demand a strategic focus on the next arenas of growth, both global and national. Although the precise trajectories of these arenas are difficult to forecast, breakthroughs in these arenas could collectively propel India toward its aspiration of global economic leadership.