India to attain 9% GDP growth at real level: Edelweiss

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Edelweiss has come out with an India 2020 report. In an interview with CNBC-TV18, Naresh Kothari of Edelweiss Capital discusses it.

Here is a verbatim transcript of an exclusive interview with Naresh Kothari on CNBC-TV18. Also watch the accompanying video.

Q: What are the basic contours of this report? By 2020 the savings of the Indian household will be much more than current GDP. Is that you sense going forward?

A: There are three-four big things we are looking at in the report. One is the basic GDP growth itself. We estimate 9% GDP growth for India over the next ten years at a real level and about 13% on a nominal level. It means that the Indian GDP, which is currently about USD 1.1 trillion, will be about USD 4.5 trillion economy in ten years time.

The second part to this is the savings, which currently are about 32% of our GDP, will go to about 35%. However, in absolute terms what is currently about USD 340-350 billion savings pool will go to about USD 1.4 trillion savings pool. Effectively, the savings in 2020 will be larger than the entire GDP that we have today. Therefore, the point that we make out of this is that the large part of the Indian growth will be driven by our own savings and we will not be dependent on external capital for this growth.

This is very interesting because till now it has been believed that India requires additional capital for growth. We are saying that external capital is welcome, it will come in but it will come in to chase the growth that India will any which ways have. The third big finding is based on our demographic profile as a nation that we currently have and that we are expected to have over the next ten years. India, which is at an average age of 26 years today, will have substantially about 29 yeas as an average age in ten years. At that economy and size level, and with that kind of an average age of population, we will have the highest working class. We will have about 52% in the working class. So you will have very high consumption demand.

This is a second big thing along with savings, which will lead to financial services and banking in few sectors. Consumption, as an opportunity will become very large. Each savings will then flow into investments in India. The largest flow in that will be in infrastructure sector. Within infrastructure, power and road has been spoken about, but we are looking at railways, water and sanitation and irrigation as three other large opportunity areas where capital will flow in.