PMS Yuva Bharat

Date: 03 Jul, 2023

At Rockstud we believe India is at cusp of transformation derived through country's rich history, diverse culture, and rapidly growing economy, it has laid the foundation for a decade that promises to be pivotal in shaping India's future. With its youthful population and government initiatives India is poised to make great strides.

We believe India’s Nominal GDP is set to increase from ~$3.5T to ~$8T by 2030 led by twin engine of growth rising middle class income and increased discretionary spending aided by digital prowess and backed by policy initiatives of government. Government rolling out reforms with emphasis on Digital India, Atmanirbhar Bharat, Startup India etc has created a conducive environment resulting in India being fastest growing economy in the world. 

With 1.3bn people carrying Aadhaar ID, doing financial transactions has become easy and cheap. UPI has scaled well beyond expectations and now processes 4.5bn payments per month. Cumulative direct benefit transfers of over $300B to Aadhaar-linked bank accounts (Jan Dhan) has been success. Lastly, Fastag highway toll system which collects about Rs. 130 crs/day and is allowing the government to recycle road assets.

One of the key areas where India is expected to witness remarkable progress is in technology and innovation. With the advent of disruptive technologies like artificial intelligence, blockchain, and the Internet of Things, India has the potential to become a global technology powerhouse. Initiatives like "Digital India" have already set the stage for the widespread adoption of digital technologies, and the coming decade will see a surge in tech startups and innovative solutions across various industries

With the right strategies and investments, key sectors like IT, Healthcare, Financials, Real estate, Auto & Auto ancillary to name few can become major drivers of India's progress, generating employment, attracting investments, and fostering innovation.

As per, Per capita GDP ($) forecast for India, it is today at where China was in 2006-07

- 1 - Refinitiv, DataStream, Deutsche Bank AG

India has now overtaken China to become the most populous country in the world and is forecast to add 97M people to its working population over the next 10 years. With the current median age at 28.4 years and rising to just 31.7 by 2030, the demographic advantages of a young populations are ready to be utilized.

- 2 - World Economic Forum, CBRE Research, RC Research, UN Dept of Economic Affairs

Over the next decade, India will enjoy the largest workforce growth of any single country in the world, and account for 22% of global workforce growth.

As affluence continues to rise, India becomes home to the largest middle class in the world, now estimated at 371M, which will continue to provide purchasing power from within. The combination of a young population and a huge middle class bodes well for consumption over many decades to come.

Electricity, cooking gas and clean water has released many free hours in a day from the previous need to fetch firewood and water. Rather than simply providing welfare gains, the unoccupied time has been converted into commercial enterprise, with self-employed activities such as handicrafts and

poultry farming increasing economic wellbeing of households.

Some of the noteworthy growth metrics India is expected to outshine over decade:

• India’s private consumption will more than double from $2T in 2022 to $4.5T by the end of the decade, a size that would be roughly similar to China in 2015.
• Manufacturing as a share of GDP will rise from 15.6% currently to 21% by 2031, which implies manufacturing value rises from $447B to $1,490B
• India's export market share can rise to 4.5% by 2031 from 2.2% in 2021.
• Our infrastructure spending is expected to increase from 4.6% of GDP in 2020 to near the previous peak of 7-7.5% by 2031.
• Internet users in India to increase from 650mn to 960mn while online shoppers will grow from 250mn to 700mn over the next 10 years.
• India should hit a major inflection point for the next residential property boom in 2030 – a confluence of high per-capita income, a mid-30s median age, and higher urbanization.
• Healthcare penetration in India can rise from 30-40% now to 60-70%; implying 400mn new entrants to the formal healthcare system.

IT sector

• In the 'Data Era', there is potential for accelerating IT investment after nearly two decades of underinvestment.
• India's technology services exports to grow at a CAGR of 11.5% in the next decade, vs. 10% over the past decade.
• India accounted for 15% of worldwide IT services spending in 2021, and industry expects this to increase to 22% by 2031.
• India's technology services workforce to more than double from 5.1mn in 2021 to over 12.2mn by 2031.
• This would help in increasing annual office absorption from 32-35msf to a run-rate of 45-50msf over the next 5-10 years
• Moreover, Covid-19 accelerated the digital transformation of enterprises, as reflected in public cloud adoption trends.

Consumption

• Consumption to maintain its share in GDP at around 58%, growing at a 9% CAGR through 2031.
• Its likely to further shift from staples to discretionary as India's per-capita income rises from US$2,278 now to US$5,242 by 2031.
• Discretionary consumption will see a big shift when per-capita income rises above US$2,000, as observed globally. As that level is passed and moves toward US$5,000 by 2031, incremental income will be spent on discretionary goods and services and household expenditure will look very different from the past.
• Non-grocery consumption (including apparel, electronics, etc) will rise to US$3.6trn from US$1.4trn for a share of overall consumption of 79.3%, up from 73.5% now.
• India's e-commerce GMV will exceed US$220bn by 2031, as per Morgan Stanley estimates, up from US$51bn currently.

Healthcare

• Covid-19 has thrown open India's health infrastructure fault-lines and both entrepreneurs and investors are on an epic mission to convert the crisis into an investment opportunity. India has the potential to generate a staggering $774B revenue in the healthcare sector by 2030
• Current market size of Indian Medtech industry is estimated to be $ 11 bn with a CAGR of 15% over last 3 years with potential to reach $ 50 bn by 2030.
• In 2020, India’s Medical Tourism market was estimated to be worth $5-6 Bn and is expected to grow to $13 Bn by 2026.
• Indian medial devices industry has the power to emerge as global leader in manufacturing & innovation in next decade. It has potential to grow at 28% p.a. to $50B by 2030.
• AI in MRI and CT imaging is the new boon in the radiology segment which allows deep learning of every organ of the body under scan. According to research by Accenture, AI might save the Indian healthcare sector $4.4 billion by 2025.

Finance

• Indian financial services sector is on the cusp of a major transformation with T3 to T6 cities emerging as the next growth drivers which are often referred to as the “next billion” markets.
• The number of custody (demat) accounts, essential to hold stocks, now exceeds 108 million – having doubled just in the last two years. Participation in equity mutual funds through Systematic Investment Plans (SIPs) has risen to an annualized run rate of $20B, making the domestic retail investor the largest public participant in the markets, eclipsing foreign portfolio investors, whose actions had previously determined market direction for years. These growing numbers still account for only 4.8% of all household assets, giving much scope for equity allocation to increase.
• As per capita GDP ratchets up to the $4,000 inflection point, financialization of assets is also expected to double, moving away from the traditional saving routes of land and gold.
• Retail/MSME loan growth to accelerate to a 19% CAGR over the next decade. This implies the share of retail/MSME loans will increase to 55% as of F2032 vs. 49% as of F2022 – this compares to 38% five years back. The total addressable market for retail/MSME lending is huge, and we expect retail/MSME loan disbursements to achieve a 19% CAGR to $2.3T by FY32.

In conclusion, India's decade 2030 holds immense promise and potential. It is primed to emerge as fastest growing economy in this decade thus overtaking Germany & Japan to be 3^rd largest economy by GDP. At Rockstud we are focused on riding this growth with clear focus on select sectors that are expected gain from inclusive growth, prosperity, and a brighter future for its citizens and the world at large.

Source: Morgan Stanley:The New India, Report, IBEF, McKinsey, Boston Consulting Group:India Economic Monitor.