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India: The unstoppable investment destination of next decade

Updated: Sep 25, 2023

In quest of sharing investment wisdom with our clients and prospective investors, here is our article in EconomicTimes.com Market Moguls which is an an elite platform, where the who's who of Indian financial markets blog on investment wisdom, strategies and challenges of investor interest. In this article, we are going to explore why India is poised to become the unstoppable investment destination of the next decade. With its robust economy, expanding middle class, and transformative trends, India offers unmatched potential for investors seeking long-term growth and lucrative opportunities. Join us as we delve into the factors that make India a compelling choice for investment in the years ahead.

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Synopsis

The IMF predicts a slowdown in global growth due to various factors, including instability in the banking sector and the lingering effects of the COVID-19 pandemic. However, India remains an attractive investment destination for the next decade.



Complete Article at ET Market Moguls


In its assessment of the global economy, the IMF forecast an uncertain future due to the instability in the banking sector, rising inflation, lingering repercussions of Russia's invasion of Ukraine, and three years of Covid. Global growth is expected to decelerate from 3.4% (2022) to 2.8% (2023). A particularly strong growth downturn is projected for advanced economies.


India is expected to grow between 6-6.5% in FY24 and in the range of 5-7% for the upcoming decade, notwithstanding the grim global outlook. In this blog, we will delve deep into the reasons why India is poised to be the most attractive investment destination of the next decade, surpassing other emerging markets and even global markets at large.


1. Robust Economic Growth:


Over the years, India has consistently outperformed several other large economies in terms of economic growth. India, with a population of over 1.4 billion, offers a sizable domestic market full of lucrative investment options.


The young and energetic workforce, expanding middle class, and rising consumer purchasing power have all contributed to the nation's continuously strong GDP growth rate.


Despite a large population, a well consuming nation and 800 million internet users, just 6% of the populace pays income taxes and only 6% engages in digital commerce. This demonstrates the unrealized potential for further formalising the economy and ensuring long-term growth.



2. Structural reforms and stable government:


The Indian administration has shown a strong commitment to putting structural reforms that encourage growth and draw in investment into place.


Business operations have been streamlined, transparency has improved, and FDI has been promoted thanks to programs like GST, the Insolvency and Bankruptcy Code, and the Make in India initiative. Investor-friendly policies and a stable political climate lay a strong basis for long-term growth.


3. Technological advancements and digital transformation:

India has embraced the digital revolution, with the aim of achieving inclusivity and pervasiveness. By 2023, India is projected to have 1.36 billion unique IDs, 8.9 billion digital payments, and 10 million GST registered companies.


The Digital Public Infrastructure (DPI) of India, which uses unbundled, open network standards, is credited with this amazing acceleration and transformation. The nation has become a technological leader on a worldwide scale, with a booming IT sector and a quickly expanding startup ecosystem.


India has positioned itself as a tech-savvy global leader thanks to its focus on digital transformation and innovation, which has boosted industries like e-commerce, finance, and artificial intelligence and provided attractive investment opportunities.


Themes for alpha returns: "Opportunities don't happen. You create them." - Chris Grosser


1. Banking and financials:


With India's nominal GDP likely to more than double in the next 7-8 years, accompanied by low corporate credit-to-GDP ratios of approximately 60%, the Indian financial sector is poised for faster growth than the overall economy.


The credit-intensive industrial sector will drive the economy's next phase of expansion, with help from digital underwriting and lending.


Given the opportunity in the sector, the banking and financial sector has excellent prospects to invest in and produce alpha returns over the next decade.


2. Renewable energy and transition to electric vehicles:


As the globe attempts to minimise its reliance on fossil fuels, India has made major investments in renewable energy and electric vehicle subsidies. The ambitious aim set by India not only opens potential for investments in renewable energy, but it also prepares the way for the rapid growth of the electric vehicle infrastructure.


With an increasing focus on clean energy and a determined effort to cut carbon emissions, India is well-positioned to lead the global shift to a greener future while also capitalising on the electric vehicle opportunity.


3. Manufacturing and PLI:


The Indian government has unveiled $25 billion in incentive programmes to attract investment in a variety of sectors, including automobiles, textiles, steel, food, electronics, and hardware, among others. These incentives are anticipated to promote capital investment and provide a boost to the economy's growth.


These activities are designed to raise exports, substitute imports, and improve global competitiveness in addition to addressing domestic demand. Automobile ancillary, electronic manufacturing, and speciality chemicals are especially well-positioned to gain from increased export opportunities.


Conclusion:


India's compelling growth story, supported by a strong economic foundation, stable government, and ongoing structural reforms, positions it as the most attractive investment destination for the next decade.


The country's technological advancements, along with investment opportunities in banking and financials, renewable energy, and electric vehicles, and manufacturing/PLI, provide ample opportunity to generate alpha returns.


Additionally, the reasonable valuations relative to sustainable growth make Indian markets even more appealing. The robust corporate earnings growth, strong balance sheet, and improving corporate governance practices create a solid foundation for sustained value creation.


As India embarks on its journey to transition from a $2 trillion to a $5 trillion economy, history has shown that this is when the mother of all bull markets begins, as seen in the cases of the US, Japan, and China. India's economy is just getting started, promising significant returns for investors.



Sumit Poddar

Chief Investment Officer & Smallcase Portfolio Manager

Tikona Capital




“Investment in securities market are subject to market risks. Read all the related documents carefully before investing.”


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