India in 2030 - how will the Indian economy look, say 10 years from now?
A thread🧵looking at key parameters based on our reading across reports. Retweet to make more people read and learn!
1/n
A thread🧵looking at key parameters based on our reading across reports. Retweet to make more people read and learn!
1/n
1. GDP
Estimated USD 6.5 TN (growing 2.5x from USD 2.6 TN in 2020).
Assumptions:
Avg. nominal GDP growth: 11.0-11.5%
Inflation: 5.0-5.5% (4% target is infeasible)
Real GDP growth: 6.0% on an average
Covid has pushed India’s target of USD 5 TN economy by FY25 by two years.
Estimated USD 6.5 TN (growing 2.5x from USD 2.6 TN in 2020).
Assumptions:
Avg. nominal GDP growth: 11.0-11.5%
Inflation: 5.0-5.5% (4% target is infeasible)
Real GDP growth: 6.0% on an average
Covid has pushed India’s target of USD 5 TN economy by FY25 by two years.
2. Per capita income
Likely to double to USD 4,300 with the increased formalization of the economy. Key beneficiaries will be consumption, banking, infra, etc
Currently, our per capita income is lower than many EM peers due to the dominance of informal economy as we see below:
Likely to double to USD 4,300 with the increased formalization of the economy. Key beneficiaries will be consumption, banking, infra, etc
Currently, our per capita income is lower than many EM peers due to the dominance of informal economy as we see below:
3. Growth of middle class and consumption:
As per a Brookings Institution study, by 2030, India is expected to account for 17% of global middle-class consumption, just behind China (22%) & ahead of USA (7%).
Key driver: India has one of the fastest growing working population.
As per a Brookings Institution study, by 2030, India is expected to account for 17% of global middle-class consumption, just behind China (22%) & ahead of USA (7%).
Key driver: India has one of the fastest growing working population.
4. This is India's Infrastructure building decade
1⃣Ambitious National Infrastructure Pipeline of INR 100 TN by 2026
2⃣Asset Monetisation (INR 6 TN by FY26) and 3⃣Production Linked (PLI) schemes of INR 2 TN for 13 key sectors
Can be a game-changer, if executed properly!
1⃣Ambitious National Infrastructure Pipeline of INR 100 TN by 2026
2⃣Asset Monetisation (INR 6 TN by FY26) and 3⃣Production Linked (PLI) schemes of INR 2 TN for 13 key sectors
Can be a game-changer, if executed properly!
5. Tax reforms to strengthen government finances
1⃣ GST (initiated in 2017) will become perfect & start yielding the desired benefits. Even petroleum products could become part of GST.
2⃣ Plugging of tax leakages
3⃣ Broader tax base: ITR filed to cross 15 cr from 6 cr now
1⃣ GST (initiated in 2017) will become perfect & start yielding the desired benefits. Even petroleum products could become part of GST.
2⃣ Plugging of tax leakages
3⃣ Broader tax base: ITR filed to cross 15 cr from 6 cr now
6. Stronger Credit growth & Banking consolidation:
Banks have a liquidity surplus of over INR 11 TN. Insolvency & Bankruptcy Code (IBC) and other banking reforms will reduce NPA risks during the next cycle.
Key themes: Consolidation, privatization, digitization and competition.
Banks have a liquidity surplus of over INR 11 TN. Insolvency & Bankruptcy Code (IBC) and other banking reforms will reduce NPA risks during the next cycle.
Key themes: Consolidation, privatization, digitization and competition.
7. Financialization of household savings to accelerate
Currently, two-third of household savings are parked in real estate and gold. Going forward, 50-70% of savings is expected to find their way into financial instruments.
Bullish for capital market prospects 🚀
Currently, two-third of household savings are parked in real estate and gold. Going forward, 50-70% of savings is expected to find their way into financial instruments.
Bullish for capital market prospects 🚀
8. India’s CPI inflation likely to average 5.0-5.5% vs. mandated target of 4% under RBI framework.
India's CPI averaged 6.9% between 2012-2016 and moderated to 3.7% b/w 2017-2019. Covid supply disruptions and increase in petroleum excise duties pushed the CPI to 6.6% in 2020.
India's CPI averaged 6.9% between 2012-2016 and moderated to 3.7% b/w 2017-2019. Covid supply disruptions and increase in petroleum excise duties pushed the CPI to 6.6% in 2020.
9. Resiliency to external shocks:
India’s gross FX reserves to rise to ~USD 1 TN by the end of this decade, from ~USD 650 BN currently
FDI flows to double to about USD 110 BN by 2030 - key support for financing the current account deficit.
Source: DB
India’s gross FX reserves to rise to ~USD 1 TN by the end of this decade, from ~USD 650 BN currently
FDI flows to double to about USD 110 BN by 2030 - key support for financing the current account deficit.
Source: DB
10. Focus on fiscal consolidation
Govt Debt to GDP: Target at 70% from 88-90%
Fiscal deficit: Target 7% from 12-14% now
Without a reduction in Debt and fiscal deficit, it will be difficult for India to get a Soverign ratings upgrade in the coming years - will be a focus area.
Govt Debt to GDP: Target at 70% from 88-90%
Fiscal deficit: Target 7% from 12-14% now
Without a reduction in Debt and fiscal deficit, it will be difficult for India to get a Soverign ratings upgrade in the coming years - will be a focus area.
11. State fiscal deficit
To moderate and stabilize around the 3% of GDP mark from 4.5% of GDP in FY21.
Here is a ranking of states on key parameters👇
To moderate and stabilize around the 3% of GDP mark from 4.5% of GDP in FY21.
Here is a ranking of states on key parameters👇
12. Deepening of India's Bond markets
Bond index inclusion is likely to become a reality soon (announcement may be made as Jan-March’22). This will lead to a fundamental shift in India’s fixed income markets.
Read more details here:
multipie.co/blog/multipie-…
Bond index inclusion is likely to become a reality soon (announcement may be made as Jan-March’22). This will lead to a fundamental shift in India’s fixed income markets.
Read more details here:
multipie.co/blog/multipie-…
13. Labour reforms and job creation will assume significant importance
Especially for states with high population growth rate. ~64% of the rise in India’s working age population by 2030 will come from the economically weaker states – Bihar, Jharkhand, Rajasthan, MP & UP.
Especially for states with high population growth rate. ~64% of the rise in India’s working age population by 2030 will come from the economically weaker states – Bihar, Jharkhand, Rajasthan, MP & UP.
14. Focus on import substitution
Many instances are already in action via additional duties on targeted products.
The #AatmaNirbharBharat focus will increase in this decade once new capacities are created via PLI.
Many instances are already in action via additional duties on targeted products.
The #AatmaNirbharBharat focus will increase in this decade once new capacities are created via PLI.
15/
In summary, India is undergoing a structural transformation that puts it in limelight on the global stage.
Aided by young demography, aspirational middle-class, reforms push, increased formalization/ digitisation & scope for large investment in physical and human capital.
In summary, India is undergoing a structural transformation that puts it in limelight on the global stage.
Aided by young demography, aspirational middle-class, reforms push, increased formalization/ digitisation & scope for large investment in physical and human capital.
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