Why should people invest in India

8/7/2019 Why should people invest in India

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India is one of the few economies in the world which have resiliently weathered

the global economic recession with 7.4% GDP growth in 2009-2010. Favorable

demographics skewed towards younger and productive population, prudent

banking regulations, growing disposable income, the macro-economic indicators

like GDP, exports and factory output, all place India among the most attractive

investment destinations.

Indias explosive domestic consumption story has placed India as one of the safest

investment bets and a premier destination based on allocation priority of global

institutional investors.

India as a prospect for investment is bright because of many reasons such as:

y The biggest advantage of investing in the Indian market is its demography.

India is the second most populous country with over 1.18 billion people as

estimated for April 2010, with 50% of its population below the age of 25

and more than 65% hovering below the age of 35. This implies that the

majority of the population here belongs to the youth category signifying

the ability to work as well as consume. Moreover youth forms an excellent

target market for products as their demands are huge.

y Indias per capita income is expected to grow 17.3% at Rs. 54527 in the

financial year 2011 implying that there will be greater demand for goods

and services due to increased standards of living.

y The Indian economy is growing at 8.6 percent for the financial year 2011.

y According to Nasscom, IT industry is going to see 19% growth in the

FY2011. This implies that the Indian economy will have a trickle-down

effect on all the upcoming sectors because of cost efficient technology and

higher job availability reducing the dependency to import technology.y There is a rising scope of medical tourism and drug manufacturing in the

economy. It is reported that India offers very feasible rates with substantial

price cuts which is expected to be one-tenth of the cost of medical

treatment available in the economic superpowers.



y According to Columbia University report, India has been ranked among the

worlds top three preferred investment destination. Several factors such as

liberalization in FDI, several economic sectors, a globally competitive

workforce, rapid growing GDP and market growth are the main drivers of

foreign investment in India. Apart from them, India has been providing lots

of incentives to the investors like partial convertibility of rupee, devaluation

of rupee (1990-1991), introduction of FEMA.

y India gives its investors the maximum cost advantage with the least cost

comparative advantage. That is the reason why India is still one of the top

outsourcing destinations.

y There is a big debate over China being a better investment destination, but

Larry Fink, CEO of the worlds largest fund manager BlackRock, said thatIndia will be a better investment destination over China for global investors

for at least coming two years till the latter moves in to the next growth

phase. Moreover, India provides better communication facilities to global

investors over that of China.

India as an investment destination in 2020:

On March 17, 2010, Edelweiss Capital has released a research report India 2020,

Seeing Beyond which says that Indias Gross Domestic Product (GDP) is likely toquadruple over a period of 10 years. It further states that India is likely to be a US

$ 4.5 trillion economy over the next decade.

The Edelweiss Capital report states,



Driven by a nominal annual growth rate of 13 per cent, GDP is set to quadruple

over the next ten years and the country is likely to be a Rs.205-trillion (USD 4.5

trillion) economy by 2020.

Infrastructure Investments The report says that the investment in infrastructure is set to witness a three-fold

increase from Rs. 21 lakh crore in the Eleventh Plan to Rs. 62 lakh crore until next

10 years.

Service-orientation as Economy Grows

The report says that as the economy develops, the share of the services as part of

GDP goes up. As the economy develops on the back of growth in real sectors like

manufacturing, industrial production, agriculture, etc., it needs to be supported

by ancillary services like Banking and insurance from financial services sector.

The report estimates a big leap in the banking and insurance sector by 5.3 timesand 4.7 times respectively, during the decade.

Other critical services which should grow along with the forward march of the

economy are education, healthcare, recreation and IT

services. Education and healthcare form a critical part in long term fundamental

sustenance of the economy on the growth path.

Proper education ensures higher literacy standard which in turn leads to declining

unemployment within the economy. The report also estimates a jump of 6 times

in domestic pharmaceutical and healthcare industry.

Income Distribution Pattern

According to the report, the gross domestic savings would grow by 3.8 times from

Rs.19 trillion in FY09 to Rs.72 trillion in by the end of the next decade. This

increased savings could lead to a huge surge in domestic consumption

expenditure which is set to triple from Rs. 30 trillion in FY09 to Rs.113 trillion in

FY20.

The report points out that a percentage of the deprived population category, in

terms of allocation of income distribution pattern within the country, is likely tocome down substantially from 51% in the year 2010 to 34% in the year 2020. As

per the report, the deprived category of population is likely to be reduced from

133 million households to 100 million households. This would reduce the

inequality among various population classes



This shift in category for deprived population would tantamount to increasing

growth in consumption-oriented middle and higher-middle class population from

47% in 2010 to 60% in 2020.

The actual numbers of population under this category are estimated to grow from120 million households to 180 million households. A substantial growth

in consuming class population could serve as a self-igniting phenomenon for the

Indian economy.

Growing Working Population Age Group

The India 2020 report states that the working age (20-59 years) population is

likely to increase by 20%, which will ensure higher per capita income and lesser

percentage of idle population with no contribution to productive output of the

economy.

The report also states that the population to be categorized under the Aged group

(above 60 years) is also likely to increase manifold to the extent of a whooping

45%. This age group could herald an increasing need for medical and healthcare

facilities apart from strong financial products like retirement and pension funds.

Trickle down effects of Rising Income

Riding on the back of some of these supportive income distribution patterns

and working population strength, the report says the organized retail is set to

grow from Rs.1000 billion in FY09 to Rs. 6260 crore in FY20.With the growing culture of mall mania and increased discretionary spending in

the hand of exploding working age population, the organized retail is set to

receive a substantial boost of a whooping 6.3 times.

With rising income, the report further states that the demand for Urban Premium

housing is set to grow big time from Rs.116 billion in FY09 to Rs.757 billion in

FY20. This posh niche of the real estate industry is set to receive the biggest boost

as against any other industry over the next decade. The demand for Urban

Premium Housing is set to rise a whooping 6.5 times within next 10 years.

The India 2020 report of Edelweiss Capital seems to be betting on Indias

population demographics and its income distribution pattern which is estimated

to go a long way in stimulating domestic consumption and investments into rising

needs of infrastructure support.



LINKS:

http://wn.com/edelweiss_capital_ltd_on_'india_2020_seeing_beyond'

http://www.ibef.org/artdisplay.aspx?cat_id=60&art_id=14328

http://indianeconomics.org/

http://www.livemint.com/articles/2010/03/13150710/India-among-world8217s-

top.html

http://www.rbi.org.in/scripts/Annualpolicy.aspx

http://en.wikipedia.org/wiki/Demographics_of_India

http://xa.yimg.com/kq/groups/15268335/1285727186/name/NileshShah-Interveiw.pdf

Indias GDP to touch 205 Trillion Rupees by 2020: Edelweiss Report

SITES EXCLUSIVELY SURFED FOR INFORMATION:

www.economictimes.com

www.livemint.com

www.google.com

www.wikipedia.com

Compiled By:

Sourav Hajra

Vineet

Choudhary

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Why should people invest in India