ARE WE HEADING TOWARDS A NEW “BULL RUN “?

ARE WE HEADING TOWARDS A NEW “BULL RUN “?

By the end of 1990, in the run-up to the Gulf War, the Indian foreign exchange reserves could have barely financed three weeks' worth of imports. The World Bank and IMF also stopped their assistance, leaving the government with no option except to mortgage the country's gold to avoid defaulting on payments. The crisis, in turn, paved the way for the liberalization of the Indian economy.  India never looked back after this and country started its long journey with series of reforms to achieve economic prosperity. Though the journey never remained easy at any moment of time and the country faced many hurdles in the form of financial scams; political instability, economic crisis over the world like the dot com bubble in 2000 and the great depression of 2008 by the virtue of US real estate subprime bubble.

Again, the Pandemic COVID-19 causing a big blow to our economy. The World Bank and rating agencies have revised India’s growth rate for FY 2021 with the lowest figure India has ever seen in the three decades since India’s economic liberalization in the 1990s. However, we observed that despite several blows of such high magnitude over the years, India never gave up and kept moving on its journey towards the goal of economic prosperity. Every crisis comes with an opportunity along with it and this time Covid-19 has awaken us in many ways, changes in lifestyle, healthcare, education and business operations are noteworthy. We have seen a lot of changes in the attitude of not only Indian entrepreneurs but Indian consumers as well. Corporates are now thinking to become global players. Self-reliant India is a new slogan which has grabbed the news headlines everywhere across the country. The crisis has taught us to adapt to technology and innovations for survival. We have learnt how to work efficiently sitting remotely using technology. The Indian economy is changing vehemently and so is the fortune of our country. Although, it’s too early to say this but it seems that with the changing attitude and adaptability, we are on the verge of a take off stage of the second and perhaps the most powerful economic wave the country has ever witnessed.

The projections enumerated below also support this assumption. 

As per the projections the middle-income group of our country has been growing year on year and it is estimated that by the end of 2030 the number of middle-income groups would reach 500 million. The projection of income growth would see consumption spending increase from about $1.5 trillion to a massive $5.7 trillion by 2030. The growth is largely driven by a huge increase in the country’s middle-class household.  The middle class will see its share of total consumption increase from 30% to 47%, while around 25 million people will rise out of poverty, with total poverty decreasing from 15% to 5% of the population. In our base-case projections, GDP will grow from $2.7 trillion to $5 trillion by 2025 and $8.4 trillion by 2030. This amounts to an average annual real growth rate of 8%, and would make India’s economy the third largest by 2026, behind China and the U.S.

India will continue on its path as one of the world’s most dynamic consumption environments, propelled by many major drivers: income growth; steady and dispersed urbanization; favourable demographics; technology and innovation; and evolving consumer attitude.  These drivers will spur the spending resulting into more demand paving way for unprecedented boost in manufacturing and service industry.  The market capitalization of listed companies is estimated to reach around 6.4 trillion dollars by 2027 and is likely to reach about $8 trillion by 2030.

 

Are we not heading towards a new sustainable BULL RUN?

Think over it and start investing in Indian equities to ride this NEW BULL RUN.

- Rajendra Jhanwar