INDIA
In the year 2000 the bulk of the population were either old
people or children - neither group contributed to the
productivity of the country. However, the working-age
population has been increasing since 2000, although the
rate of increase is slowing a bit now. Hence until 2050,
India's working age population will go on growing.
Productivity would improve as the following happens:
- Networks improve - 5 G and good telecommunication,
building roads, railways. ports and airports,
- New Education Policy to make students more employable.
- Production linked incentives to improve manufacturing and not be restricted to just assembling when bringing technology into the country.
Last year we overtook China to become the most
populous country. Starting in 2030, India will have the
highest working population in the world - contributing
about 30% of the working population, which would also
be 70% of India's total population.
Returns are always made on growth. Growth at a country
level is a function of population and productivity. To be an
investment destination Growth has to be applicable with
scale. As we are a US$ 3.5 tn economy and the 5th largest
in the world, and if we grow at 6-7%, it makes a difference
to world growth. Before Covid-19, the world’s GDP was
US$ 90 tn. In a good year, the growth would be 3% - US$
2.7 tn. Out of this US$ 1.8 tn was attributed to the USA and
China. That is why the USA and China are investment
destinations. India, before Covid-19, was 16% of the world's
population and contributed 4% to the world's growth.
However, in 2022 we have contributed 20% to the world's
growth, where the world added just US$ 1.5 tn. In the next
10-15 years India will be amongst the largest contributors
to the economic growth of the world. That means we will
be amongst the largest consumers market, the biggest
labour pool, and the biggest investment destination.
Hence India is entering a golden period.
What is most important is that we have a per capita
income of just US$ 2400, which will double in the next 8-9
years. GDP doubles in 12 years, but the population does
not grow as fast so per capita doubles much faster. As the per capita income doubles, certain sectors will grow
exponentially - Consumer discretionary (currently 30% of
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China's stock market), savings, investing, and
automobiles.
India has always been expensive. In the last 15 years and
also in the last 5 years (and that too after the rally in China
of last quarter) in dollar terms China's stock market
returns have been negative. In the same period, after the
US, in dollar returns the best market has been India. This is
because we are a democracy, well regulated - protecting
minority interests, lowest weightage of State-owned
companies, and have better visibility of earnings - not only
economic growth.
Listed companies in the US in 2000 were 3500. In the last
25 years market capitalization has gone up 3X. - but the
number of listed companies has become half. Alpha has
gone to the private market in the US due to cross-overs,
buyback, mergers, etc. India's equity market is different.
We have more than 7000 listed companies and the bulk of
the economy is not even reflected on the stock exchange.
Capital is a function of opportunity. We were not growing
between 2015 to 2019, as there were structural changes
and interventions in the market. 2010-20, EPS growth was
3-4% in rupee terms and negative in dollar terms. and so,
the Government had to lead the effort. All that is now
behind us and India is poised for exponential growth.
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