A feature story from Aberdeen Asset Management
India: 1.3 billion people, will soon overtake China, once a hindrance to growth, will be its greatest asset in the future
1. Indians are young with over 65% of the population under 35
2.majority are highly educated and fluent in English
3. 70% of the population live in rural areas with massive potential for urbanisation
4. Indians are diligent savers and generally eschew debt
5. potential demand for a variety of goods and services from a large and expanding middle class is huge.
1. growth without redistribution
2. gender equality
After the war, the socialist and protectionist model of development had failed
low growth and a series of severe balance of payments crises
Planning Commission – a key agency for economic planning for successive governments through until 2014
Inflection point in 1991, India undertook reforms (embracing market economy) out of necessity – the country was on the brink of default
15th Prime Minister elected in May 2014, enacting reforms from ‘Make in India’ to improving sanitation services.
“Our trip to India reinforced our view that the seeds of significant structural changes have been sown.”
Central to Modi’s success will be his continued focus on competitive federalism – the principle that Indians are best served by allowing state governments to compete with each other (disbanded ‘one size fits all’ )
Government efficiency is improving considerably and the number of stalled projects is declining.
Make in India:
“some investment has taken place and more is to come, infrastructure is still poor.” Roads, power and transportation are all key target areas of ‘Make in India’.
opportunity for car growth – India has around 18 cars per 1,000 people, compared to China’s 130 and Brazil’s 250
attracted more FDI into new projects than both the US and China
FDI by GE, Alstom, Samsung-Techwin, Foxconn
The Land Acquisition Bill aims to streamline the complex process of acquiring land from rural farmers and tribes for building much-needed infrastructure
Progress can now be made on a state-by-state basis without the need to wait for central government to pass legislation
Modi’s approach is likely to further foster competitive federalism. A healthy level of competition between states for land, funds, talent and other resources is good for the country
1. transform the country into a digitally empowered knowledge economy
2. boost standards of governance of citizens through better engagement with the government
infrastructure required is vast: broadband networks, public Wi-Fi hotspots, universal phone connectivity
30% of FDI flows are tied to the rapidly expanding e-commerce sector
largest employers in India’s premium college campuses are now start-ups, many of them technology-focussed (Alibaba Group’s investment of $680m in Paytm, an Indian payments start-up)
‘Digital India’ is one of many reforms that is helping make doing business easier in India
Fixing corporate India:
According to the World Bank, it takes 28 days to start a business in india (19 days in Pakistan, 11 in Japan, 4 in Korea and just 3 in Australia)
One scheme in Delhi, soon to be adopted in other parts of the country, has cut the time required to incorporate a company to just one day
‘Start-Up India, Stand-Up India’ campaign bridging the gap between new start-ups and venture capital and angel investors
bankruptcy law help clear up bank balance sheets to allow lending for more productive purposes
“The divergent fortunes of India’s banks became clear to us on our latest visit”
India’s central bank has now urged lenders to clean up all bad loans by March 2017
With the private sector unwilling or unable to participate in the current round of investment, planned government expenditure having risen significantly this fiscal year.
“If one looks closely, changes are taking place everywhere. Indeed, reforms were always intended to be long-term in nature, rather than big bang.”