Sushant Bhansali, CEO at Ambit Asset Management
India’s current median population age stands at 26 years with around 36 percent of the people under the age 20. Among the key developed and developing nations, we are one of the youngest countries, certainly younger than the US, Australia, China, South Korea, UK, France, Germany and Japan. What is icing on the cake is that with an average 1 percent growth rate, our population is getting younger by the year.
We have one of the highest working-age population, around 63 percent people fall in the age bracket of 15-59 years, which can help transform India into an economic super power.
This demographic advantage is what sets India apart from other global economies like China and Japan that are ageing faster.
1) Increased savings: Several economies, such as Japan, South Korea and China, were able to benefit from the rise in their working population by engaging them in productive employment, ushering in periods of sustained economic growth. Working age is also the prime years for savings, which is key to accumulation of capital and technological innovation. We do believe that India is at the cusp of this change.
2) Rapid industrialisation and urbanisation: Not just a young population, India also sees a swift urbanisation which, we believe, is crucial for India’s economic growth. Cities occupy just 3 percent of the landmass, but contribute around 60 percent of the GDP. India is, however, transforming rapidly into an urban country and the pace of transformation is only expected to accelerate going forward, driven by the migration of labour from agriculture to urban-based industry and services and increased agricultural production.
3) Powering domestic consumption: The vision for the future of consumption in India is anchored in the growth of the upper-middle income and high-income segments. Share of upper-mid and high income households in India is expected to increase from 24 percent in 2018 to 51 percent in 2030. At the same time, India will also lift nearly 25 million households out of poverty which will reduce the share of households below the poverty line to 5 percent, down from 15 percent currently. Domestic consumption, which powers 60 percent of the GDP today, is expected to grow into a $6-trillion opportunity by 2030, supported by a 1.4-billion-strong population that is younger than that of any major economy. Household savings have historically been high as cautious Indian families put away more than 20 percent of their income for a rainy day. This buffer provides support to domestic consumption expenditure even through challenging cycles in economic activity.
With higher working population and rapid urbanisation, India is well poised to achieve strong economic growth over the coming decades. Improvement in women labour participation will provide a further push to India’s growth journey.
As the economy undergoes this structural growth, can the markets remain far behind? We believe as the economy grows, markets will run at a faster pace and create massive wealth for the investors. The bull run of 2021 so far, is just the tip of the iceberg and massive wealth creation opportunities remain. The only thing that we need to be cautious about is to invest in ‘good and clean’ companies.
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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