Investing In India

Investing in India

Emerging markets like India are fast becoming engines for future growth, and the country have several important drivers which is expected to lead the country’s development going forward:

Region of South-East Asia: India is a part of the larger region of South-East Asia, which will be the dominant growth-driver globally the next 10-30 years. It is expected that Asia will contribute 75 % of total global growth in 2040. India will stand for 30 %.

Stable Government: India is the world’s largest democracy with a population of 1,35 billion people and has maintained this since its political freedom from Britain some 50 years ago. The latest results of “ease of doing business” where India have moved from 142nd (2014) to 63rd (2020) is one example of the reforms and improvements lately.

Digital development: A number of digital reforms and the increased internet access via mobile phones is leading the way for a digital development which is changing India is record pace.

Strong Economic Growth: India has realized strong historical growth rates, particularly in the information technology and business process outsourcing sectors. These continue to be among the largest sectors of the global economy.

Positive Demographics: India has a youthful, educated, and growing workforce with an average age of 28 years. This is very different from regions/countries like Europe, USA, Japan and China, and should help support Indias economic growth for a long time.

Source:  McKinsey – “Asia’s future is now”

Financial Markets

The Indian Stock Market: Most of the trading in the Indian stock market takes place on its two stock exchanges: the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). BSE have more than 5 500 listed companies, NSE have more than 1 800 listed companies. The most significant firms of India are listed on both the exchanges, and about 500 firms constitute more than 90% of the market cap.

The Indian Fixed Income Market: The size of the Indian fixed income market is more than 2 100 billion USD, where 50% is Central government bonds, 25 % is State government bonds, 21 % is corporate bonds, and the rest a mix of T-bills plus commercial papers.

The Indian Startup/Venture Market: The Indias venture/startup business is number three globally, behind USA and China. The digital revolution is totally changing the face of business in India, with Aadhaar and smart phone access for 760 million people (2021) as the main drivers. This is a driving force in the venture industry, and most of the globally leading managers are already established with its vintages of pure India venture funds.

Source: ICICI Prudential AMC – “Presentation”

Why India?

India’s scale is extraordinary, there is no market over the next 20 years which offers more growth opportunities for business than India.

  • By 2025, one-fifth of the world’s working age population will be Indian.
  • By 2030 there will be over 850 million internet users in India.
  • By 2035 India’s five largest cities will have economies of comparable size to middle income countries today.

A long view is important for any strategy. For India it is essential. India is a market which requires patience, perspective and preparation. Change in India is often invisible to the naked eye. That is one reason why perceptions of India in the Nordic business community are slow. Many are largely unaware of the significant positive changes taking place in India and shaped by a ‘once bitten twice shy’ perspective, ref Telenor.

India needs to be understood on its own terms. It will always march to its own tune. It is the only country with the scale to match China but it will not be the next China. Comparisons with China only get in the way of understanding the nature of the opportunities in the Indian market.

No Indian Government will be able to direct the economy in the way China does. Nor will it ever have the control over the allocation of resources which has been intrinsic to China’s economic success. China has a discipline to its economic planning which flows from its one party political system and the competence of its state institutions

Indias growth will be driven by consumption and services, not exports. It has demographics on its side, a long entrepreneurial tradition, an expanding consumer class, significant headroom for productivity improvements and the confidence that comes from a strong sense of its civilizational pedigree and destiny.

The drivers of Indian growth are deeply structural which suggests they are also sustainable. They include the urbanisation of the world’s largest rural population, the gradual movement of the informal economy, currently comprising 90 per cent of India’s workers, into the formal economy, a young demographic with a mean age of 27-28, considerable investment in infrastructure, and the beginnings of an ambitious program to upskill 400 million Indians.

Most of all India has scale. It will by 2035 overtake China as the world’s most populous country. This means a deep domestic market which will likely make India the world’s third largest economy by 2035 after China and the United States measured by market exchange rates. It is already the third largest economy measured by purchasing power parity.

Source: Peter N. Varghese – “An India economic strategy to 2035, navigating from potential to delivery”