India has seen a rise in mergers and acquisitions (M&A), with over 600 M&A transactions being registered annually since 2018.1 The combined value of these transactions has increased from $50 billion to $60 billion annually, between 2014 and 2017, and to $110 billion annually now. M&A activity in India has spanned all sectors and deal sizes, but has been especially remarkable for transactions exceeding $1 billion.

The M&A transactions have been of three kinds: domestic, such as Tata Group’s acquisition of Air India; increased appetite of foreign players to step-up in India, such as Belgian Proximus Group acquiring a majority stake in Route Mobile; and global ambitions of Indian players, such as Bharti Airtel acquiring a stake in UK’s BT Group.

The acceleration of M&A activities could be significant for India. M&As have powered several economies: M&As as a percentage of GDP over the last 30 years, from 1994 to 2023, for the US has averaged 8.6 per cent, for the UK 9.8 per cent, and for South Korea 3.7 per cent. It has been 2.4 per cent for India, suggesting there is room for M&As to drive India’s growth further.

M&As could unlock economic progress in India in multiple ways, such as the following:

Impactful scale and exponential growth, through domestic deals: M&As usually consolidate fragmented sectors, increase efficiency, and achieve economies of scale. Strategic acquisitions by Carnegie Steel in the late 19th century, and the attendant synergies, caused annual US steel production to surge from 13,000 tonnes in the 1860s to 11.2 million tonnes in the early 1900s — more than the combined steel production of England & Germany then.

More recently, we have seen the consolidation of R&D, manufacturing platforms, material sourcing and manufacturing bringing significant growth in the global automotive sector, especially during the 1990s. Sectors such as insurance and auto components in India can benefit substantially from consolidation, bringing more efficiency, R&D intensity, and, indeed, stronger players.

Capital availability and infrastructure development support, through foreign players’ stepped-up India play: M&As enable availability of essential capital to a country for scaling infrastructure and boosting productivity. Investments in infrastructure-related sectors through M&As have driven overall economic growth in several countries, it unlocks the pace and scale of capital that may not otherwise have been accessible to local infrastructure developers. For example, Brookfield acquired Jio’s 1,35,000 communication towers in a 30-year agreement for $3.4 billion, boosting Jio’s 5G potential and unlocking capital for Jio’s further growth in telecom.

Open doors to new markets and technology, through global ambitions of Indian players: M&A can give companies immediate access to new markets and help achieve ambitious expansion plans. Acquisitions also pave the way for organisations to receive and embrace advanced technologies and innovation that can transform their processes and products.

Plug portfolio gaps, creating a more holistic, competitive Indian brand to reckon with globally: Strategic and bold overseas M&As have paved the way for Indian companies to enter new markets, and segments. For example, Tata’s acquisition of Jaguar Land Rover has enhanced its global play and presence in the luxury car segment.

Programmatic M&A, which is when companies pursue multiple small or medium-size acquisitions to achieve specific growth, innovation and/or efficiency objectives, with distinctive execution across all stages of M&A — from strategy and sourcing to due diligence, deal and integration — plays a critical role in driving growth. It can complement organic growth and propel India towards its aspiration of going beyond a $30 trillion economy by 2047.

Daisuke Nozaki is a Senior Partner in McKinsey’s Tokyo office, and Dipak Daga is an Associate Partner in the Mumbai office. The authors thank Srujan Tiwari (McKinsey’s Senior Knowledge Analyst) for his support for this article