December 19, 2017
Over recent years, three key factors have been driving India’s explosive economic growth: first, a burgeoning and increasingly urbanised population creating unprecedented levels of consumer demand; second, increasingly innovative governmental reforms, designed to reinvigorate the economy; and, thirdly, enhanced globalisation which has made the subcontinent a worldwide technology hub. Red Ribbon Asset Management has increasingly placed these factors at the core of its portfolio management strategies ever since the company was established more than a decade ago.
But now it seems we need to add a fourth factor to the list…
Last month’s influential Sector Report from Morgan Stanley Research identified the increasing digitisation of the Indian economy as a new driver for growth: underpinning a rapidly accelerating move away from the subcontinent’s traditional dependency on cash, particularly in its consumer markets. In the words of Anil Agarwal, Morgan Stanley’s Head of Asian Financial Research:
“The country was already on a strong trajectory, but digitisation puts India’s nominal GDP growth on track to compound annually by more than 10% in U.S. dollar terms over the coming decade …the result could be a multi-trillion-dollar opportunity.”
India is already poised to become the world’s third largest economy in absolute terms by 2027, with GDP set to reach a staggering $6 Trillion. And the subcontinent’s equity markets, currently ranked tenth in the world, are projected to jump to fifth with financial services and consumer discretionary stocks leading the way.
Interestingly in that light, the Morgan Stanley Report goes on to conclude that although Indian Companies and markets will (inevitably) be the most obvious beneficiaries of these trends, the global implications for India’s cycle of economic resurgence should not be underestimated either.
“The associated increase in e-commerce, consumption growth, financial products and investments could make India a significant market for corporations worldwide…Most importantly, it will become the template for other emerging nations. In fact, there may be lessons for developed countries too.”
But what exactly does digitisation mean in that context and why is it so important?
Well, the cornerstone of the analysis is the Jan Dhan Program which was launched by the Indian Government with the aim of ensuring that every household on the subcontinent would have access to a bank account by 2020. Since the program was launched three years ago,, a staggering 285 Million bank accounts have been opened (from a starting point where 35% of Indian households did not have a bank account at all).
Then there is the recent surge in mobile phone and Internet use. India currently has more than 800 Million mobile phone users, every one of whom is now able to join in the digitisation revolution started by Jan Dhan. And just in case you’re wondering, the United Kingdom currently has 41 Million Mobile Phone users and the United States 266 Million (roughly 3% and 25% respectively of the equivalent figures on the subcontinent).
These are the two demographic factors that Prime Minister Modi’s Government is currently bringing together so as to turbo charge future economic growth in India, encouraging the population to move further and faster towards a cashless market by incentivizing digital payments, because it knows, better than most of its western counterparts that cash transactions can seriously hinder economic growth. No wonder then that Morgan Stanley has identified digital transactions as a key facilitator of a brighter economic future.
India is now demonstrating that it has the capacity, as well as the will to make that happen.
Red Ribbon CEO, Suchit Punnose said:
Last month’s influential Sector Report from Morgan Stanley Research identified increasing digitisation on the subcontinent as a new driver for growth, underpinning, in particular, a rapidly accelerating move away from India’s historic dependency on cash, particularly in consumer markets.
In the words of Anil Agarwal, Morgan Stanley’s Head of Asian Financial Research: “The country was already on a strong trajectory, but digitisation puts India’s nominal GDP growth on track to compound annually by more than 10% in U.S. dollar terms over the coming decade …the result could be a multi-trillion- dollar opportunity” India is already poised to become the world’s third-largest economy in absolute terms by 2027, with GDP set to reach a staggering $6 Trillion by the middle o the next decade. And its equity markets, currently ranked tenth in the world, are projected to jump to fifth with financial services and consumer discretionary stocks leading the way.
So why does digitisation matter so much as a driver to these significant trends and economic projections? We take a look in this week’s newswire.
Read the Morgan Stanley Research Report here:
Read about the Jan Dhan Program here: