India Shining – We will Rule the World

It is well published and we all know that in the past 5000 years of  India  history, India has never invaded any country. But do you know that out of the that last 5000 years, 4750 years – India’s growth rate (which is measured by increase in GDP or Domestic Product) has been the highest in world. It was only when the British came to India, we saw, India’s GDP going down. NO wonder, India was known as SONE KI CHIDYA.

sone ki chidiya

India called “Sone Hi Chidya” because we contributed almost 30% of World GDP at some time.

Year 1000 (in 1st AD it was 32.9% & currently we hold 7% share on PPP basis)

Source: Wikipedia

Once again, we, the Indians are making some big impact in the world’s economy. India is the now fastest growing nation of the world.. & third largest economy PPP basis.

The International Monetary Fund (IMF) downgraded forecasts for GDP growth rate of many countries including China. But it is positive on India. Here are the GDP growth rates of the last few years and forecasts for 2015 and 2016 –

India GDP NumbersSource: IMF

The important thing to note in this table is that India’s GDP is expected to grow at a higher rate than China. The International Monetary Fund (IMF) also expects good growth rate all the way up to 2020.

India Rise How & When Video

Hans Rosling was a young guest student in India when he first realized that Asia had all the capacities to reclaim its place as the world’s dominant economic force. At TEDIndia, he graphs global economic growth since 1858 and predicts the exact date that India and China will outstrip the US. (India Shining Best Video)

Why is India on this path of good growth?

High GDP growth rate is attributed to many factors –

1) New Government – The government has taken some positive steps for smooth business and better governance. There have been steps towards effective administration, cutting red-tape and improving transparency in government offices.  This  has increased efficiency which helps businesses as dealings with the government departments are smoother. administrative efficiency helps since it comes after several years of policy paralysis. There have been announcements of many policy reforms which help the economy. For example, it takes 27 days to register a business. The new government wants to make India a business friendly destination and has planned steps to be implemented so that businesses can be registered in one day. Import rules for some raw materials have been eased. The budget announced a corpus of Rs. 1000 crore set up for entrepreneurial units and startups. Yes, there are still hiccups for foreign investment and bureaucracy functioning but these things cannot be changed overnight and there is an awareness and intention to change these issues. There is a wave of optimism within the country as well which makes people motivated to do better in their profession, service and business which contributes to the business.

They also react to changes in the global economy and business. For example, looking at the declining oil prices, the government hiked the excise duty on petrol and diesel to augment its revenues and the additional revenue has been allocated for infrastructure development. Considering that the whole world is going digital, the government has started working towards a Digital India where all government records will be digitized.

2) Steps taken by RBI – The Reserve Bank of India (RBI) led by Raghuram Rajan has also taken fresh steps to improve the banking system and economy. The inflation was very high. For example, Consumer Price Index (CPI) in November 2013 was 11.2% and in November 2014, it fell to 4.4%. Of course the dropping of oil prices also had a role to play in this. The rupee was also unstable before the new governor took charge. Now the rupee has performed better than many currencies. Fiscal deficit is also more in control now. The markets also have more confidence in the new central bank governor.

3) Oil Imports – India’s oil import bill is very high and one of the main reasons for export import imbalance. Now with falling oil prices, inflation has been contained, GDP growth has improved and current account balance in in a better shape. This presents a good opportunity for reform and growth as capital saved on the oil bill can be used for investment in infrastructure and public goods.

4) Demographics – India has the advantage of a young population and a widely educated population ready to join the workforce. This means additional GDP can be produced. The dependency ratio in India is good so there are more people working and lesser people dependent on the working population compared to many other countries. If the young population is trained and educated in the right skills, this human capital can be used in the best manner else the huge population can become dependent on limited resources which is not good for the economy.

Look around you and will realize one more factor which is driving India. This is the youth of the nation. YES, the young India. Do you know, India account for over 25% of the total young population of the globe which is less than 35 years of age and it accounts for more than 60% of  our population. Young population not only adds to working population but are the main drivers of demand. just ask yourself, DADA ji jyada demand karte hai ya phir pota – poti.

5) India has maximum number of English speaking person, even more than the entire population of US. No wonder India is becoming a outsourcing center for the globe. The entire world is looking at India to support for their service. A credit card verification in Australia takes place in Jaipur. If you dial railway enquiry number from London, it lands up in Gurgoan Call center. Just Amazing.

5. India is growing on Infrastructure and even if half of the projected Infrastructure projects become reality, it will further give boost to India’s growth. New government is actually talking about laying more roads than built in last 50 years.

The list to India’s growth story is endless and it would takes more space than the entire blog till date.

Let’s quickly see extract from famous report of Goldman Sach “Dreaming the BRICs: Path to 2050” (BRIC = Brazil/Russia/India/China)

India will takeover Japan in 2032 to become 3rd largest economy of the world, just behind US & China.

How to participate in India Growth Story

All I want to convey is that we need to Believe in ourselves. The direct impact of this growth story would reflect in the equity markets and to share this prosperity, you need to partner India companies for long run by way of Equity Investment. Invest in Equity and you will reap the benefits of  Indian growth story. In the last 35 years, India’s GDP has grown consistently over 6% and now we are nearing 7.5% GDP growth target. In the last 35 years, stock market have given more then 17% returns p.a. and Rs. 1 Lac invested in sensex is worth more than 2.6 crores as on Today. But the fact that a average Indians have not participated such marathon growth.

India Shining

In 2004 Election, BJP used this Phrase “INDIA SHINING”.

That was just an ad or punch line but in reality as well, India is Shining. We at TFL, will bring series of articles where we will share information, facts, videos etc on why India is actually shinning and why as an Investor you should be knowing these facts.

To start the series, lets understand the real strength of this economy – the rising of middle class.


By Middle class, we mean what is commonly understood i.e., the Middle Income Group.

This middle class in India is not only just rising but rising at a very fast pace.

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India will have more than 80% of its population in this bracket by 2040. Just take a look at the graph below.

*Middle Class: Income between Rs. 3 Lakh – Rs. 15 Lakh(2009-10) Source:Equitymaster

This middle class is not the same what it was just a decade back. They were then branded as a conservative and thrifty people.

But not anymore, India’s middle class is now dynamic, educated, liberal and forms the pillars of this vibrant Indian economy. And why do you think Middle class helps economy to grow? Most importantly, they help in distribution of wealth to many rather than concentration of wealth to few. Now when the wealth gets distributed to many, spending of money or channelizing the money in the markets takes place at a faster pace. For example, all these middle income group people demand goods and services like Fridge, TV, Cable Services, etc . and more demand means more growth for industries and in turn, more development of the economy at large.

It is not a rocket science and we believe everyone can understand that the Indian Businesses which will be serving this large segment of people will stand to gain. Look at the way the software company Wipro has become so big after demand of computer software went up since 1980s. Now the shareholders of the company became wealthy as the business went up. It is sometimes hard to imagine but it’s a fact that Rs.10000/- invested in Wipro’s shares in 1980 is worth more than Rs. 4 crores today.

Now the overall demand in India is rising at a very fast pace whether its consumer durables, garments, Education & what not. Just to give you an example – take a look
In 1980s, owning a car was RICH people’s dream and now owning a car(Source: CLSA) is just an ordinary thing in life. This not only helps car manufacturers but so many people get employed, so many other industries grow to support car industry and hence the development takes place.

The speed of vehicle goes up when the wheels rotates at faster pace. Similarly, the speed of the money rotation from one hand to another is the speed of the growth of the economy.

DON’T YOU THINK SO?? Believe in our economy and take benefit from it. Foreigners have understood the strength of India but as we say DIYA TALE ANDHERA; we Indians have yet to realize our fullest potential.

Proud to be among the Indian Middle Class

The dream run is on. All researchers are busy anticipating the time when we would cross the US economy and threaten China. The basic assumption of this research is that India is getting rich. The population has become a boon to our nation (I think Government also agrees, as they are no more showing the legendary “hum do hamare do” advertisements). But is it only the population which will make us competitive economy or there are some other factors also? Population rate is faster in Pakistan but it is on the mercy of the international aid it receives. So only population cannot be the only criteria. So what else? Just look at the below graph.

The population officially is classified into Socio-Economic Classes (SEC). In the above graph, Sec B & Sec C is the middle class. A big chunk of the population is the middle class and this class is reaping the opportunities that the nation is giving. This class is educated as the literacy levels are now 81%. See the figure below.

This middle class is young also. This means that the phenomenon of India enjoying this spending regime would be longer. The country would have more youth and fewer dependents. Young atmosphere creates vibrancy and opens gates for new ideas and contemporary spending. The demanders ask for new and improved things and the cycle of money keeps on revolving. See how the population age graph coverts from a hill shape in 2000 to a dome shape in 2025.

And that not all as on international front also we shall continue to ruin the sleep of BRIC countries, US and UK.

And when we talk about spending the major part goes towards paying mortgage, EMI and rent. 20 % of the earning goes towards buying groceries. The spending on transportation and communication is increasing making India the market of “New Launches”. Clothes and apparels which we did not care in past, now accounts for 10%. Clearly the help from the Bollywood and Fashion weeks seems to be working.

And when it comes to Automobiles, gone are the “Hamara Bajaj” days. Every member in the family wants his own 2 or 4 wheeler. And why should boys have all the fun…..

Conclusion: The Indian Middle class is rapidly increasing its size and purchasing power, and will be an increasingly important force in global economic rebalancing. Indian middle-class clearly has shown that they are on a verge of creating a demand which would be enormous in size. They have highlighted that they want to invest in automobiles, mobiles, credit cards, home loans, holidays, shares (Read: What is Equity) etc. So if you are planning to invest in India, this is the time. The fancy has caught the bigger investors and soon would trickle to small investors. So it’s your turn to earn for the India Inc.

Credit & Source: the graphs and some information have been sourced for the CLSA India Report 2009.

Time has come for us to realize our own potential and maximum benefit from it. Please let us know what do you feel about ‘Indian Growth Story’?

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12 COMMENTS

  1. Indians have carried out military expeditions / colonizations in the past, if you accept people living south of the Vindhyas as Indians – look it up in this link.

    Govindaswamy

      • It is understandable – after all we are educated by the British system whose primary aim was to make it easy to rule by perpetuating the myth that Indians are basically docile & kill their self belief. As you rightly pointed out, India was a rich country (we need to remember the GDP / person was also far higher, since our population was also around 30 crores) before British rule. Yet, the English system made many Indians believe that British rule was largely beneficial (railways, highways, education, industry etc. touted as examples).
        BTW, why dont you do a blog on how Brittan looted India & used instruments like imposing the gold standard instead of silver which India had in plenty, use of taxes & levies etc.

        Govindaswamy J

  2. I hope India become “Sone di Chidi” again but guess what, I don’t trust politicians. They have their own vested interest in policies and reforms.

    NaMo Govt taking positive steps to move India ahead but not so aggressive like they campaigned. I live in Punjab and I know what their Allies Akali Dal is doing here.

    Anyways, Nice post as always. Looking forward to learn more from you.

  3. I am obsessed reading your blogs since past 10-11 months. Though I never commented before (I am a beginner in this field), what I had started doing is learning about and investing in share market steadily (credit to your teaching). And even with the little understanding I am having, I was able to see some good returns (which I did not encash – “time in market”). So perfectly agree with your views on inevstment in share market.

  4. Dear Hemant,

    thanks for the very informative piece. it is a very well written article.

    the growth rates as shown by you are commendable. that means the previous government was also doing some pretty good job in managing our economy when there was a great deal of volatility in international market.

    Am i right or wrong?

    regards

  5. I think it has become a match between the central government and the rest. What is happening in Delhi and Bihar is disgusting. It remains to be seen how the central government is able to overcome the hurdles of the united opposition.

  6. Nice post, Yes defiantly, india will shine. If everything goes good, we will be #2 economy by 2040 (as per my calculation). India has even more potential then China but only thing we should avoid is Caste and reservation. If we discriminate this, we can rule the world, easily.

  7. Where did you get the GDP figures for 1000 AD? It was foreign invaders who called India sone ki chidiya because it was as easy to rob India as it is to trap a bird with a bait of grain. Gold or wealth was concentrated in a few hands and temples which were easy to loot. GDP does not reflect the economic status of majority of people who have always been poor everywhere. Today, India has the third largest economy but 30% people do not get two square meals a day. India has always been a rich country inhabited by the poor. Sharing and caring beyond family is not a common trait. Look at the number Indian billionaires today and their dismal philanthropy. India in the past (before the British colonized India) was ‘andho mei kaana raja’. So was Indian hockey until other countries took the game seriously. Don’t gloat over a non-existent past. Leave the past to where it belongs: history. Do not stray into subjects you do not specialize in. Concentrate on finance, the present and future. Keep up the good work of educating the financially illiterate.

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