WILL THE NEXT DECADE
BELONG TO INDIA?
There are four big trends in the world. All these are problems for the rest of
the world but have turned out to be advantageous for India.
Demographics
|
Problem: As a species, we are getting older. By 2050, there
will be more people over 65 years than those under 14
years. Currently, there are 6.3 persons working for every
person over 65 years, which will go down to 2.4 persons by
the turn of this century, and 4/5th of those over 65 years
will be in the developed world, needing assistance. Also,
the population itself is falling. Hence productivity around
the world is falling rapidly.
INDIA: We are set to become the most populous country
in the world soon. Our working population is growing,
although at a slower pace. According to UN estimates, by
2030, India will emerge as one of the largest suppliers of
labour, accounting for 23% of the global working-age
population. India's low labour cost gives manufacturers an
edge. Also, more and more women are also joining the
workforce.
Further, our average per capita income has crossed the
tipping point of US$ 2200 p.a., and hence there will be
|
funds available for discretionary spending. India has a
burgeoning middle class which will move from about 60%
to 80% of the population. At the top of the income
pyramid, those earning more than US$ 35000 per annum
will rise 5-fold in the next decade to over 25 million.
Luxurious brands Louis Vuitton and Cartier have Deepika
Padukone as their Brand Ambassador to attract Indian
buyers.
|
Problem: The world was Bi-polar previously, with two
spheres of influence. The US dominated consumption,
and China was the factory of the world. There is increasing
talk of China + 1, and with the energy crisis that Europe is
facing, even Europe + 1. In a multipolar world, groups of
nations with enough influence and incentive to follow
economic strategies do not substantially follow the
policies of the two global power centres.
INDIA: India is forging its own geopolitical path in this
multipolar world and focusing on its strategic interests.
That means siding with Russia for oil purchases and
joining Western alliances, such as the Quadrilateral
Security Dialogue, alongside the United States, Australia,
and Japan.
India has been the "office" of the world for some time now,
and with CEOs becoming more comfortable with working
from home, India's share of the global services trade has
|
increased by 60 bps to 4.3% and is expected to rise further.
India is also slowly becoming a factory to the world as
countries try to reduce their dependence on China.
Domestically too, there is likely to be a wave of
manufacturing CAPEX, owing to Government policies.
Manufacturing share of GDP is estimated to rise from the
current 15.6% to about 21% by 2030.
|
Problem: Digitalisation is disrupting the way that we do
business. The last time there was such a disruption was in
the 1870's decade when the internal combustion engine,
the bulb and the telephone was invented.
The US model is Laissez-faire and built on advertising
revenue; China sits behind a firewall and has created
domestic behemoths like Alibaba and Tencent, and the
European model is regulation-oriented.
INDIA STACK: India is pursuing a distinct model for the
digitalisation of its economy, supported by a public utility
called IndiaStack. IndiaStack, which operates at a
population scale (starting with Aadhar), is a
transaction-led, low-cost, high-volume, small-ticket-size
system with embedded lending. The digital revolution has
already changed how India handles documents (India is
the only country in the world that can e-sign in the cloud),
invests, and makes payments. It is also set to alter how
India lends, spends and insures.
Now 3 programs will be driving India's decade.
- ONDC World (digital commerce) - enables
interoperations between buyers and sellers
|
- OCEN (open credit enablement network) - Will raise
credit penetration by transitioning the system to
cash flow-based lending (through g-pay for small
traders). It also has the potential to lower credit costs
due to enhanced data access from multiple systems.
This will democratize credit at a population scale for
both consumers and businesses.
- Digital health ID, will enable a unified interface which
will be interoperable across health service providers.
It will allow customized insurance solutions and give
the population better healthcare access.
|
Problem: The world is trying to move away from fossil
fuels due to climate change. Decarbonizing the industry
will be costly, especially among the four sectors that
contribute 45% of its carbon dioxide emissions: Cement,
Steel, Ammonia and Ethylene.
INDIA: India's difference is that its energy consumption
and energy sources are changing simultaneously in a
disruptive fashion. Another difference is that India's
energy needs are still growing; therefore, legacy capacity
using fossil fuels will not be destroyed as it transitions to a
higher share of renewables. We believe this will:
- positively impact India’s terms of trade,
- entail about three-quarters of a trillion dollars in energy CAPEX,
- eventually, reduce headline inflation volatility as the imported energy share of GDP declines,
- lower fertilizer subsidies,
- improve living conditions, and
- create new demand for solutions such as electric
vehicles, cold-storage chains, and green
hydrogen-powered trucks and buses.
|
In the next decade, India will be a staggering 20% of global
growth (now 3-4%). We are now a US $ 3.5 tn economy and
will grow to US $ 7.9 tn in the next decade - more than
doubling our size. The number of people earning more
than US $ 35,000 p.a. will go up five times. The middle
class will expand exponentially.
Key Risks: Include a prolonged global recession or
sluggish growth, adverse geopolitical developments,
domestic politics and policy errors, shortage of skilled
labour and steep rises in energy and commodity prices.
But nothing can stop India from becoming the 3rd largest
economy in the next decade (based on the report by
Ridham Desai - Morgan Stanley).
|
References From:- Mr. Ridham Desai - Morgan Stanley
|
After a year we have reached all-time highs again on the
Nifty/Sensex. If the momentum builds up, then the equity
market has a good chance of going up further.
Structurally the market is strong, with a monthly mutual
fund Systematic Investment of Rs 13,000 cr, and in
addition there is monthly investment in direct equity and
also NPS and Insurance. Hence about Rs 22,000 cr
monthly inflows from retail investors can offset the
cyclical sell offs from Foreign Institutional Investors, so
corrections may not be deep.
Only a debt bubble burst, internal unrest and external
conflict could deepen a correction, but that would only be
an opportunity to invest to take advantage of India's
Decade.
|
|
The US Federal Reserve has made it clear that until
inflation is down, there is no imminent rate reversal.
However the market believes that the rate of rise of
Interest rates will slow down. RBI, to support the rupee
and control inflation, would also take similar action.
However currently yields are attractive, and investment in
debt can protect your capital.
|
|
If US interest rates do not rise too much and if the Dollar
index remains range bound, then gold/silver could rise
further.
|
|
|
AKURDI |
WAKAD |
WANOWRIE |
MAGARPATTA |
B-20, Jai Ganesh Vision, Akurdi, Pune-411 035. |
No-1, Nisarg Deep Apartment, Kaspate Vasti Wakad, Pune-411 057. |
No. 26, Shraddha Regency, ’A’ Opp Kedari Garden, WANOWRIE, Pune-411 040. |
No. 14, 4th Floor, Destination Centre, Magarpatta City, Hadapsar, Pune-411 013. |
|
|
|