18 Sectors in Focus for India’s Growth

For a long time, “India growth” has been a very wide-angle story: demographics, reforms, IT services, rising consumption, and a general sense that scale would eventually do the work. The McKinsey’s work on India’s 18 future arenas is an attempt to tighten that lens. The argument is simple enough: if India wants to lift its share of global GDP from 3.4% in 2023 to somewhere between 8-10% by 2040, it cannot rely on diffuse progress alone. McKinsey’s argument is that this would require a set of more concentrated bets where innovation, capital, and demand are all moving in the same direction.

These bets are what McKinsey calls “arenas” – categories where growth is unusually dynamic and where the potential for structural change is high. In the modelling, 18 such arenas together generated about $690 billion of revenue in 2023 and could reach $1.7 to 2.0 trillion by 2030, contributing roughly 30% of India’s incremental GDP by 2040 if they scale as expected.

How a Sector Becomes an “Arena”

The report is explicit about what qualifies a sector. It is not enough to be large, or to be growing slightly faster than GDP. Three conditions need to line up.

First, there has to be a step change in technology or business models. McKinsey looks for sectors where patent activity is more than twice the median or where R&D spending is more than twice the national average. That is how robotics, biopharma, and industrial electronics move into the frame: they are already showing disproportionate innovation intensity in India.

Second, there has to be sustained investment momentum. On the private side, the screen is for sectors that have attracted more than $1 billion of average annual PE/VC capital between 2022-24 or have seen investment grow faster than 15% a year between 2020-24. On the public side, the report pays attention to budget allocations, infrastructure commitments, and schemes such as production-linked incentives that indicate long-term policy backing. The presence of long-duration conglomerate capital is treated as another signal that the sector is not a passing fad.

Third, the addressable market needs to be both sizeable and fast-growing. McKinsey filters for sectors already above $3 billion in size and expanding at more than 12% a year, or those that are clearly displacing a large incumbent market with a superior alternative – for example, e-commerce inside Indian retail or renewables inside the power system.

When the Indian economy is run through those three filters, 18 arenas remain. The claim is not that these are the only areas that matter, but that they are the ones where innovation, investment, and market momentum are compounding together in a way that can move the macro needle.

What Sits Inside the 18 Arenas

McKinsey divides the arenas into four archetypes based on two dimensions: how strong India’s current capabilities are, and whether the primary market is domestic or global.

The “Build for India” group includes semiconductors, industrial electronics, robotics, and nuclear fission. Capabilities here are still nascent, but the strategic rationale is clear: these are foundation sectors for self-reliance in hardware, critical components, and clean energy. Policy instruments are already visible, from a $10 billion semiconductor incentive package to long-dated nuclear expansion plans.

The “Pursue accelerated scale-up” bucket contains renewables with storage, e-commerce, cloud services, travel and tourism, and urban construction. These are largely domestically focused demand engines where India already has meaningful capabilities. Urban construction, for example, is projected to grow from roughly $170–190 billion in 2023 to about $490 billion by 2030, driven by housing demand and infrastructure build-out. Travel and tourism, currently valued at about $170 billion and growing in the low-teens, is expected to more than double on the back of domestic leisure, medical tourism, and spiritual travel.

“Build global competitiveness” covers electric vehicles and batteries, medical devices, biopharma, aerospace and defense, and bio-to-x (biomass-to-fuels, chemicals, and materials). These are areas where India’s capabilities are developing but not yet dominant. EV demand is projected to rise sharply, with some estimates pointing to a 15x increase in domestic battery demand by 2040, and India is positioning itself as a manufacturing and recycling hub. Biopharma and medical devices are growing at double-digit rates, but still represent a smaller share of India’s pharma economy than in many advanced markets, leaving room to catch up.

Finally, “Achieve global leadership” includes auto components, space, AI software and services, and cybersecurity. These are the arenas where India already has strong capabilities and a clear line of sight to global relevance. The auto components sector has moved from a trade deficit of about $2.5 billion in 2019 to an estimated surplus of roughly $300 million by 2024, indicating that Indian suppliers are competitive outside the domestic market. The space sector is targeting 8% of the global market by 2033, supported by more than 200 startups and around $450 million in investment between 2021 and 2024. AI software and services could generate about $14 billion in revenue by 2030, benefiting from India’s role in managing global IT infrastructure.

It is a wide spread of themes, but when you step back, three pillars dominate: physical infrastructure and construction, climate and energy transitions, and code-heavy digital systems. Many of the other arenas are essentially combinations or applications of those three.

The Scale of What Is Being Claimed

The macro frame is ambitious. India’s share of global GDP has already risen from 1.9% in 2008 to 3.4% in 2023. To reach an 8–10% share by 2040, McKinsey’s modelling suggests that India would need to sustain real growth of roughly 8 to 8.5% for two decades – a pace few large economies have maintained historically.

Within that, the 18 arenas are expected to nearly triple their combined revenues from $690 billion in 2023 to between $1.7 and 2.0 trillion by 2030 and to account for about 30% of incremental GDP by 2040.

Where the Drivers are More Visible and Where They Remain Aspirational

The 18 arenas are not equally mature. Some are already large, growing steadily, and supported by visible demand drivers. Urban construction is already large and growing, underpinned by a housing shortfall, rapid urbanisation, and public infrastructure projects. Travel and tourism is diversified across domestic leisure, outbound travel, and niche segments such as medical and spiritual tourism. Auto components have a tangible export track record, and e-commerce and cloud services are operating at scale with established business models.

Other arenas are more dependent on policy execution and technology risk. Nuclear fission assumes that India can scale capacity from about 8 GW today to 100 GW by 2047, using both fast breeder reactors and small modular reactors, which is a long-duration engineering and regulatory challenge. Renewables with storage hinge not just on hitting headline capacity targets but on deploying battery energy storage systems at scale and integrating them into the grid. Bio-to-x relies on reliable biomass feedstock and competitive plant economics.

Global, code-led plays like AI, cloud, and cybersecurity sit somewhere in between. The talent base and demand signals look strong, but the competitive set is global, switching costs can be low, and value capture depends heavily on intellectual property and the depth of product ecosystems. The estimate that India’s AI software and services revenue could reach $14 billion by 2030, for instance, is material but still small relative to the size of the global AI market that may exist by then.

In other words, there is considerable substance behind the list, but also a wide dispersion of execution, policy, and market risk across the arenas.

How the Framework Is Useful Without Over-Reading It

This is a descriptive framework, not a recommendation to invest in any specific sector or asset. It suggests where conditions are already aligned, where innovation activity, investment momentum, and market size are all pointing in the same direction, and where those ingredients are still forming. It also makes clear that different arenas require different strategies: patient, capability-building approaches in semiconductors; rapid scale-up in renewables or e-commerce; IP-heavy, partnership-driven plays in aerospace, EVs, or biopharma.

The framework does not tell anyone which specific company, asset, or project will succeed, and it is not a substitute for deal-level diligence. What it does offer is a structured way to think about prioritisation, timing, and depth of work. Some arenas are already sizeable and accessible to capital today; others may sit outside a conventional fund life or depend heavily on how policy evolves.

The Necessary Skepticism

There are also obvious questions that the narrative itself cannot answer. Sustaining 8%+ real growth for twenty years in a more fragmented, less trade-friendly world is a tall order. Whether state capacity can deliver the fast-track clearances, R&D platforms, and joint labs that the playbook sketches out is not guaranteed. And the same constraint set is being asked to support multiple arenas at once.

Those caveats do not invalidate the exercise, but they do frame how to use it. As a map of where concentrated effort is most likely to matter, the 18 arenas are a helpful starting point. They move the India story from generic macro optimism toward a more specific set of sectors where the interaction of technology, capital, and demand could plausibly deliver step-changes in scale. The real work now sits below the brochure level: understanding which of these arenas can translate that potential into durable cash flows on time horizons that match the capital backing them, and which are better treated as long-dated options rather than near-term engines of return.

Research Analyst

Simran Mehla

Frequently Asked Questions

Q: What does “18 sectors in focus” refer to in this article?

A: It refers to a set of sectors identified in McKinsey’s work on India’s “future arenas”. These sectors show a combination of higher innovation activity, sustained investment, and meaningful market size or growth compared with the broader economy.

Q: How were these sectors chosen in McKinsey’s framework?

A: They are selected using indicators of higher R&D or patent intensity, sustained private and public investment, and a minimum threshold of current market size and growth.

Q: Are these the only sectors that will contribute to India’s growth?

A: No. Many other sectors contribute to GDP, employment, and investment. The 18 sectors in this framework represent areas where specific indicators of innovation, capital flows, and market growth are currently more pronounced; they are not an exhaustive list of growth drivers.

Q: How should the growth and revenue numbers be read?

A: They are published projections and scenario estimates from external research; actual outcomes can differ if growth, policy, technology, or demand evolve differently.

Sources

1. McKinsey
2. Business Standard
3. Fortune India