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| Resilient India |
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If the UK ruled the world in 19th century and the US in 20th century, India and
China are all set to rule the world in the 21st century. The indications are
clear and the baton has already been passed on. The rich countries of Europe
have seen the greatest decline in global GDP share, followed by the US and
Japan, while the share of India in world GDP is increasing.
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Performance vouches for the predictions. During 2005 to 2007 the economy grew at
an average rate of over 9%. India’s unanticipated 6.7% growth the economy
recorded in 2008 - 09 despite surviving the worst global economic crisis in 70
years, the ‘26/11’ terrorist attack on the financial capital, facing 25% deficit
seasonal rainfall followed by floods in a certain areas and being an election
year proves India’s resilience. We expect India to continue to demonstrate
stronger resilience and steadier growth over the next few decades. Many factors
are responsible for this robust performance.
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India’s growth story is characterized by strong domestic consumption. Unlike its
East Asian peers, exports form a small share of its GDP. This implies a healthy
mix of savings and consumption. While the country’s consumption stands at 50% of
GDP its savings are adequate at about 36%. China, for instance, is now facing
problems being overly dependent on exports due to its low domestic consumption
and unusually high savings. To a great extent this healthy mix immunes India
from the global demand conditions.
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While Indian markets are one of the least penetrated, it still is the fourth
largest in the world. The huge untapped market offers a great potential for
growth. Under developed infrastructure also adds to the scope. This potential
fires the multiplier effect - with increased consumption resulting in increased
production, more revenue, increased investment and in turn more income, again
leading to more consumption. These opportunities ensure the incessant flow of
the much needed foreign capital to India.
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India’s relatively huge young population will also ensure the pace of growth.
The country will continue to benefit tremendously from one of the lowest
‘elderly dependence’ ratio amongst the world for at-least another 30 years.
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Additionally, public and private sector saving which together constitute
domestic saving; typically finance over ninety per cent of India’s investment.
This prevents it from being overly dependent on foreign capital. Increasing
domestic savings and inflow of foreign funds will ensure funds availability for
investments. Also there has been a colossal migration to higher income classes
going on in India – from lower class to middle to upper class. This had led to a
burgeoning middle class. These factors in addition to the immeasurable parallel
economy ensure sustainability of the economy’s independent growth.
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When the Indian economy broke free from the shackles of ‘control regime’ about
two decades back, several sectors began to blossom while others didn’t enjoy
similar growth. Many of these sectors have now started emitting growth signals.
Even within the sector, we find companies, which are likely to outperform their
peers. In the times to come, they could replace the ‘hitherto’ leaders.
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You can catch our detailed view and analysis of these sectors, companies, and
the economy on this website. While we place before the investing community our
views on the economy, a particular sector or company based on our research and
understanding of things, investing community are well advised to make their own
enquiries before taking an investment decision.
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