What KV Kamath, Aditya Ghosh, other CEOs think about India's economy in FY24 and beyond

The Indian aviation industry is currently the third-largest and fastest-growing market in the world, with a 10 percent CAGR over the past decade, almost 2.5x higher than the global aviation industry growth.

At the 19th Motilal Oswal Global Investor Conference held in Mumbai on August 21 and 22, CEOs of prominent Indian companies deliberated on the expansive growth avenues that lie ahead for the economy in FY24 and beyond.

They were confident on a range of factors, like consumer spending, favourable government policies, and the transformative impact of changing demographics.

Speaking at the conference, Raamdeo Agrawal, Chairman of Motilal Oswal, said that India’s retail equity market is on a swing and is on course to get bigger on the back of a boom in savings. The country's gross domestic savings are also expected to grow to $103 trillion over the next 25 years.

Here are some of the highlights from the conference:

1.     Young demographics, growth from Tier 2 and 3 cities, better connectivity to drive airline growth  

The Indian aviation industry is currently the third-largest and fastest-growing market in the world, with a 10 percent CAGR over the past decade, almost 2.5x higher than the global aviation industry growth.

Speaking at the event, Aditya Ghosh, co-founder, Akasa Air, said that the aviation sector was under-penetrated and that there is untapped potential. Currently, only 3-4 percent of Indians travel by air.

There is untapped potential in the airline segment. Air travel could replace rail transport because of affordability, young demographics and growth in Tier-2 and 3 cities. While near-term growth momentum for airlines remains strong, India also plans to boost the number of airports to 220 by 2025 from the current 148, and it is expected to issue a record number of commercial pilot licences in CY23, surpassing 1,135 licenses issued in CY22.

The hospitality industry is also expected to witness major macro tailwinds, such as improving discretionary incomes, favourable demographics, and increasing per capita income in the next decade.

2.     Generative AI promises productivity gains, threatens Indian IT

The next two years could play a foundational role in the development of Generative AI-led business models. In coding, Fractal Analytics co-founder and vice chairman Srikanth Vellamakani said that Generative AI has shown more than 50 percent productivity gains.  A growth in the Generative-AI segment could prove to be a challenge to the Indian IT sector as dependency on humans for jobs involving coding would reduce. An example of the impact of AI was seen in a recent report, which said that when Italy banned Chat GPT for a few months, coding productivity dropped by 50 percent.

While overall technology spending from corporates will only increase, given the focus on the space, it may shift spending from IT services to other areas, which are better suited for an AI-led corporate environment.

3.     Increased budgets, more contracts to be awarded to rail infrastructure players

An increased focus on railway infrastructure, budget allocation increase (Rs 2.6 lakh crore for FY24E), innovations in design and private sector participation can be seen in the segment. Companies across the sector -- metro car manufacturers, metro component manufacturers, track-laying EPC companies, conductor and cable companies as well as ancillary part manufacturers -- could benefit from increase in contract-awarding.

4.     Increasing scope for banking system: a perpetual funding machine

According to KV Kamath, chairman, Jio Financial Services, with improving profitability and a healthy 16-18 percent RoE (return on equity), the banking system could “emerge as a perpetual funding machine”.

The Indian growth momentum remains healthy, backed by a large domestic consumption base and a consistent GDP growth at 6-7 percent.

Growth opportunities and success are also being seen in the under-penetrated financial sector and infrastructure segments. PSU banks have played an important role in contributing to the growth momentum in the sector by laying the foundation for growth as well as providing future growth momentum for the sector.

“Fintechs are at last showing some positive momentum, and, hence, they will not only survive, but will also thrive given the large underlying opportunity,” Kamath said.

5.     Under-penetrated standalone health insurance segment

COVID has heightened the awareness of the need for insurance coverage. Health insurance premium grew at a CAGR of 18 percent for FY2019-23. Overall, for the general insurance segment, this number stands at 7 percent. Retail health has also seen a growth of 18 percent CAGR. Healthcare out-patient expenditure in India stood at 51 percent, compared to 26 percent globally, due to the under-penetration in the health insurance segment. The industry could see a 20 percent + CAGR over the medium term on the basis of three growth drivers – policies, implementation of price hikes and an upswing in the sum assured per policy. They will translate into a sustainable 20 percent-plus CAGR for the industry over the medium term.

Also read:

6.     Continued rural finance demand, NBFCs to continue delivering growth

Credit demand in rural India continues as the rural economy remains robust.  This includes demand in segments such as affordable housing loans, microfinance and vehicle finance. One of the enablers within the segment has been Microfinance Harmonisation guidelines. Under these guidelines, there is a limit on loan repayment obligations of a household. NBFCs will also continue to deliver healthy loan growth and strong return ratios, despite the competition from banks.

7.     After four years of decline, cement industry to grow at 8 percent CAGR

The industry’s demand grew by around 8.5 percent CAGR for the FY2003-13 period. This growth was primarily led by housing and capex. After a decline in demand in FY2014-23 due to reforms impacting early-stage growth, cement demand for FY2024-30 is expected to be at 8 percent CAGR.

For the segment, the capacity is estimated to grow over FY2024-30, at approximately 6.5 percent CAGR, with a significant contribution from the leading players. Overall, India’s cement capacity is estimated to grow by more than 50 percent to 980 MTPA (metric tonnes per annum) by FY2030, from 630 MTPA in FY2023.

Speaking at the event, Puneet Dalmia, Managing Director, Dalmia Bharat, said he is positive about the growth in the cement industry as demand, which is mainly from the infrastructure and housing segment, continues to be strong.

8.     CY2023 a record year, share of listed and unlisted developers to double

In FY2023, the share of listed developers and leading unlisted developers increased to 34 percent from 17 percent in FY2017. This is expected to further increase to 50 percent over the next 1.5 months amidst consolidation. According to a report, launches are likely to be dominated by large and listed developers, such as Godrej, Prestige, Macrotech, and DLF, which have a strong pipeline. They are targeting Rs 20,000 crore in pre-sales in FY2024.

According to Anuj Puri, Chairman and Founder, Anarock Property Consultants, calendar year 2023 is expected to be a “record year due to consistently strong momentum and favourable affordability”. Customer preference has also shifted to mid- and high-end apartments, which now account for 60 percent market share, up from 50 percent in CY18.