GDP: India in the age of financialisation; to add $1 trillion every 18 months

GDP: India in the age of financialisation; to add $1 trillion every 18 months - The Economic Times
Aug 14, 2017, 11.26 AM IST
By Rashesh Shah, Chairman, Edelweiss Group

It is a wonderful time for the Indian economythe markets are booming with rising participation from domestic investors, structural reforms like GST, BankruptcyCode and RERA are transforming the economic landscape and cyclical drivers, including corporate earnings are expected to improve significantly going forward.

With a strong growth rate which should be sustainable for an extended period, India's large GDP, exceeding $2 trillion, should witness a massive compounding effect. By 2025, India could possibly be a $5 trillion economy , adding $1 trillion every 18 months thereon! It won't be a surprise to see India challenging the hegemony of countries like USA and China, with a GDPwhich could touch $20 trillion by 2040. This is truly, India's Golden Age of Compounding.

Savings-Investment paradox

Traditionally, India has experienced a unique savings-investments paradox while Indiansare inveterate savers, this has not translated into financial investments. However, rising financial literacy, simplification in investment processes and growing understanding that long-term wealth will accrue to investors and not savers is changing the way how Indians envisage financial investments.

Household leveraging

A household balance sheet consists of assets (savings and other investments) and liabilities (loans). While the assets side is witnessing steady movement from savings to investments, we are seeing a shift in the liability-side behaviour of an Indian household.

Households are becoming more comfortable with the concept of leveraging, confident in their ability to invest and earn a better return than their cost of borrowing. This behaviour has been driven by the decline in inflation and the consequent falling interest rate environment that we are in.

With the interest rate trend to continue going forward, effectively, there are two tectonic shifts which will happen in India financialisation of savings on the assets side and the democratisation of credit on the liabilities side.

Financialisation of savings

Domestic flows into the equity market have been rising incrementally over the last couple of years. While there have been surges in domestic flows into equity earlier, this time the change is structural.

This is due to a variety of factors sustained investment for an extended duration of time, better performance of equity asset class compared to real estate and gold, lower equity ownership of Indian households compared to global peers, low share of savings in the household asset profile and increased awareness, access and belief in equity market opportunity.

This structural change is reflected in the numbers. Household savings in shares and debentures are on the rise. Mutual fundshave been a favoured avenues to invest in equity this is seen in the number of MFfolios which have quadrupled in the last 3 years from 0.3 million to 1.3 million.

Monthly SIP flows are now around Rs 4,500 crore an annual inflow of more than Rs 50,000 crore! Growing awareness in equity markets will have a collateral positive impact on investor interest in other financial assets like insurance and bond markets.

With growing acceptance in the power of investing, retail investors will be open to exploring newer avenues of investment. Regulators and organisations are making efforts to educate investors on financial investments. Under-penetration in sectors like insurance provides room for growth.

Democratisation of credit

The financialisation of assets is only one part of the India growth story. An equally important facet is around democratisation of credit allocation in the economy. Allocation of capital in equity and debt markets has undergone an evolutionary change.

Today, these markets allocate capital purely on fundamental strengths in the business of a company. However, 70 years after independence, a significant portion of banking credit is extended to top 100 business houses. There is a significant untapped opportunity in the retail lending side of the business. This would include loans to individuals and to SMEs.

The situation is changing now, particularly because of the sizeable leveraging ability of households. Today, the government balance sheet is being leveraged for considerable capex investments that are happening. The corporate balance sheets are at the tipping point or maybe over-leveraged. Indian households are the only segment with borrowing capacity.Coupled with falling interest rate, households are ready to borrow more.

The introduction of Aadhaar, coupled with the JAM trinity has helped bring a huge part of the population under the financial net. With continued strengthening in CIBIL, improved credit underwriting mechanisms and the use of a wider variety of data points to assess the credit worthiness of individuals and small businesses, access to credit is expected to increase for the credit-deficient sections of society and lead to a broad-basing of credit allocation in the economy.

Future Optimism abounds

With such a wide variety of factors falling in place, there is significant cause for optimism for India. Fundamental structural changes are re-shaping the economy and cyclicals are starting to become stronger.

With the global economy starting to recover, the cumulative effect should drive the economy to new heights. There are challenges which we need to be cognizantof lack of job creation, impact of strengthening rupee on trade and challenges on agriculture.

To truly understand the India story needs a bifocal vision one which can cut through the short-term volatility and challenges and look at the long-term trend, which has always been upwards. Because, the near-term volatility is inherently visible and the long-term growth usually invisible; a truly all-encompassing bifocal vision helps look at the economy in a rational manner.

The mantra should be to play the long-term positive trend and manage the short-term uncertain volatility, rather than the other way round. If the short-term is managed well and the long-term played to its optimum, it is a great time to be a part of the India growth story and to reap the growth dividend along with the economy.

http://m.economictimes.com/markets/...lion-every-18-months/articleshow/60053379.cms

 

I had told the certified idiot of this forum claiming himself to be a banker that NaMo will bring down the exchange rate of Rupee to dollar to boost Indian economy as we are a net importer. Khangrass in last 10 yrs under UPA did the opposite of it as they wanted to bring back the money looted from India at a higher return rate and devaluing Rupee was one such gain for them. USD went up by 50% in just three years. All bribes received abroad gave an instantaneous return of 50%. This certified self styled idiot banker has no clue about the link between black money and rupee value.
As we grow at near 9% and also pair the rupee to its real value, the net growth will be in double digits. Did anyone of you notice that INR is up by 5.5% against green buck in last four months.
When I had told this stupid self styled banker about economics, he had made fun of me. I had told him that NaMo will bring it down to about 40.
I expect that these service sectors like software industry will find the going tough and hardware industries will pick up with help from Taiwan and Japan. In next 10 years, if we do not create a strong hardware industry of our own, the import of hardware from abroad will outstrip the combined value of gold and oil imports. NaMo has moved in right direction by giving away 60K crores for setting up manufacturing industry in India for semiconductors and chips. We are world renowned in software, why must we have Chinese hardware?
AAPiyaas can never understand it. Bringing back black money or making it useless is one and the same thing. Let me see if this idiot can understand the meaning of my words.

 

Please go through this thread "http://indiandefence.com/threads/trade-war-looming-between-india-china-chinese-state-media.63509/" India has imposed anti dumping duties on 93 products imported from China firing the first shot in India-China Trade war, following it US too has initiated sanctions on Chinese products. Dragon is going to feel economic heat now as both India & US start DEEP Frying this DRAGON.........

 

Hey I can't find the link for exactly which 93 products are we talking about? Could you give a source? Mostly interested to know whether solar equipments are included.

Also what US sanctions?

Thanks in advance....

 

Anti-dumping Cases in India Product and Profiles

http://commerce.gov.in/writereaddata/traderemedies/productprofile/cases_1.pdf

 

In that thread about Dokalam stand off, I had written this good about four days back that a war/skirmish will boost jobs in India and Indians will create counters to China internationally. That time people negatively commented on it. It seems even this article is based on what I had posted as now these idiots are realizing the truth about it.
BJP can't call for boycott of Chinese goods being in power to avoid WTO complications. So what is the way forward? Let people shun Chinese products and let china shoot its own foot off by its own gun.
This is called Chanakya Niti. As I told you, Sun Tzu needs others knives but Chanakya will kill you by your own knife. That is why I stated that Sun Tzu wud not even qualify to be the manual scavenger in the toilet of Chanakya.

 

Subramanian swamy's clones can be seen everywhere these days.

If economy is $5 trillion and say growth is 10% then it will be adding $750 bil per 18 months. But why 18 months again?. Its like these guys decide clickbait title first and write content around it.

 

Some credit to the writer, he is not a journalist, he's the chairman of a financial company.

 

China added $1T every year after they touched $5T. In just 5 years, from 2009 to 2014, they climbed to $10.5T.

 

Those days have come to an end....more so when we are wiping out 50 Billion USD going forward.

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