Active cases and deaths post the second wave of covid-19 have declined. The economy appears to be well-placed on its path to recovery but how does the short-term and medium-term look like?
To decode what the economy has to offer, Cafemutual Confluence Investment Conference 2021 (CCIM 2021) hosted Sunil Subramaniam, MD, Sundaram MF, who shared with us his outlook on the Indian economy.
Sunil believes that the Indian economy stands strong from a short-term perspective. Exports and the manufacturing sector have gained momentum and unemployment has been four-month low.
Talking about the medium-term, Sunil shared a positive outlook, which is largely derived from India’s rising labour supply for the next 25 years. Further, the manufacturing activities are expected to rise threefold by the end of this decade. Competitive production cost, a working population of 67% as of 2020, 92% youth literacy rate as of 2018 and the rising number of new graduates makes India well-positioned from a demographic perspective against other economies.
Additionally, India’s lower corporate tax rates & improved ease of doing business ranking as against its Emerging Market (EM) peers, infrastructure spends, and Production Linked Incentive (PLI) Scheme will help to increase the share of exports, improve Foreign Direct Investment (FDI) inflows and attract global companies.
India’s per capita income is projected to grow up to $ 4,200 in FY 30 as against $ 1,890 in FY 20, which will drive consumption and push manufacturing growth. Notably, for every manufacturing job, 1.8 jobs are created in the services sector, which currently accounts for 56% of GDP as against a 30% share of manufacturing. On the back of the consumption boom, there will be a boost in the services sector.
India’s 10-year moving average is expected to grow at 7% to 8% per annum for the next decade thereby making way for a $ 4.1 trillion economy by 2025.
Addressing the translation of economic opportunities into investment return, Sunil shared that the stock market is expected to generate at least 2% to 3% alpha over nominal GDP growth of 13%. This average return of 15% is further expected to go up to 18% subject to an appropriate selection of investment avenues. Finally, going by the rule of 72, wealth can be doubled every four years at such return levels.
Sunil took the audience through emerging trends and opportunities that lie ahead for the Indian economy. Watch this video to know every detail of Sunil’s attention-grabbing session.
