As a famous epithet from a famous Bollywood movie goes ‘Picture abhi baaki hai mere dost!’‘
With all the news surrounding slowing global economy, particularly China slow down, why India remains a rare bright spot in the world economy, doing better than trouble spots such as Brazil, Russia and South Africa? With growing youth segment, rising incomes which is leading to increase in purchasing power, higher brand consciousness, growing urbanization, rising internet penetration and easily available credit, Indian consumer story is entering the next phase of unprecedented growth. On this topic, Following is a guest post from Subbu.
I had always wanted to pen down this article signifying the sheer strength of Indian demography. Indian story can be best described as a Function of Population which is what the title says – F(Population). India with a population of 125 crores is the only place in the globe which can grow at close to 10% for decades to come due to the lower GDP base and also due to the huge urbanization drive which is waiting to happen in the next 1-2 decades to come by. Yes, you heard it right, I am talking about investing and staying invested for next 1-2 decades (10-20 years) which is the “real” long term strategy which will work wonders. You can earn hugely just by tax-free dividend if you stay invested in good Indian companies for the next 1-2 decades.
Let’s look at the urbanization which is bound to happen in India. India today has 37 Crore people living in urban areas which is going to grow to 60 Crore people by 2030 as per various reports. That’s addition of 24 Crore people to cities in 15 years. To give an analogy, 24 crore people is close to 80% of current US population. That is the sheer number of people who will lead the consumption growth right from basic amenities to infrastructure to high-end services. India needs urban homes, roads, schools and other basic infrastructure for the next incremental 24 crore people who are going to live in cities. With the flagship programme of Smart Cities by the Indian Government, the number can grow only bigger.
India constitutes the second largest market in the world for Facebook and LinkedIn. However, the projected penetration of the Internet in 2015 is just 19 per cent in India compared to 50 per cent in China and 61 per cent in Brazil. With the Govt of India digitization program and smart city projects, this is bound to change over the next decade, hundreds of millions of Indians (including rural house holds are expected to come online. As a result India’s e-commerce market is estimated to expand to over US$ 100 billion by 2020 from US$ 4 billion in 2014. The drivers of expansion of e-commerce in India are the same as China. “Growing internet population, limitations of physical retail beyond large cities, and well-funded ecosystem .players are all drivers (in India). These are similar to those in China, where e-commerce grew at a CAGR of 76 per cent since 2003 to $306 billion. With less than 5% of Indians shopping online, Indian e-commerce story is at the cusp of next wave of growth.
What is in it for an investor?
This huge consumption boom will drive demand across sectors – realty, automobile, services, education, and healthcare. The urban population will drive online retail which is projected to be $300 B market by 2025(online retail sales in china crossed $300B last year) . The sales of personal cars, two-wheelers, consumer durables can only rise from this massive urbanization drive waiting to happen.
I am personally a “Big Bull” on Indian growth story and the Indian companies across various sectors have tremendous opportunities to cater to this demand and grow bigger. How to invest in these sectors? As an equity Investor, just pick up companies which you understand best across any sector and just stay put for next 20+ years to see the magic unfold for yourself. I personally believe there will be tons of multi baggers in the stock market in the next 1-2 decades.
Will finish up by reminding you that India is very unique because of the size of its population and don’t miss the investment opportunities in the coming years!