In June 2023, the USA was teetering on the edge of a debt default. Yep, you heard it right – the land of burgers and baseball almost stumbled into a financial abyss.
With a debt mountain that could make your head spin ($32.7 trillion, a whopping 121.2% of GDP), the US barely scraped by, lifting the debt ceiling just in the nick of time.
But hold onto your hats, the story didn’t end here.
Fitch, the global ratings agency, downgraded the US credit rating from AAA to AA+ on August 2nd, 2023. Now, I know what you’re thinking – did this downgrade have the stock market shaking like a leaf? Yes, this news sent shockwaves through global markets, reminding us that when the US catches a cold, the world sneezes.
But guess who’s shrugging off this chilly breeze? India, my friends!
Here’s the cool part: India isn’t bothered by all this chaos. In fact, it’s thriving! Morgan Stanley says India is doing great and upgraded its rating to ‘Overweight’. These folks reckon India’s rocking economic growth, fueled by big investments and fatter profits. The same Morgan Stanley nudged India up from ‘underweight’ to ‘equal weight’ four months back.
The twist is that not too long ago, these same experts called India part of the “Fragile Five” because they thought it was a risky place to invest.
So, what changed?
India is undergoing a massive transformation. It’s moving from being known for things like spices and beautiful sarees to becoming a middle-class powerhouse. This kind of transformation is super rare.
In the past, countries like Europe and the USA had their moments of amazing growth after big events like World War II. That’s when famous brands like Chanel, Volkswagen, and Gucci became a big deal. Now, it’s India’s turn to shine.
So what changed for India?
Let’s talk about four exciting things happening in India:
More Manufacturing
India’s making more stuff, and that’s going to boost its economy. It might even double its share of the global market for exports.
India’s Share of Manufacturing is expected to increase to 21% of GDP by 2031
Growing Middle Class
More people in India are joining the middle class, which means they have more money to spend. This is going to make India’s economy grow even faster.
By 2047, if political and economic reforms have their desired effect, the Indian income pyramid will have a smallish layer at the bottom comprising the Destitute and Aspirer groups, a huge bulge of the middle class, and a big creamy ‘rich’ layer on top.
Source: PRICE’s ICE 3600 Pan India Surveys
India’s Income Pyramid
Source: PRICE’s ICE 3600 Pan India Surveys
Middle-class is the country’s biggest contributor in terms of income, spending, and savings
Indian consumers are also likely to have more disposable income. India’s income distribution could flip over the next decade, and consequently, overall consumption in the country could more than double from $2 trillion in 2022 to $4.9 trillion by the end of the decade with the greatest gains going to non-grocery retail, including apparel and accessories, leisure and recreation, and household goods and services, among other categories.
Going Digital
India is getting super high-tech. They’ve been working on a digital identity system, and this is making things like payments and healthcare more accessible and affordable for everyone.
Over ten years ago, India started a cool project called Aadhaar. It’s like a super secure ID card that uses your unique body features to prove who you are and where you live.
Now, we have something called IndiaStack which is like a toolbox for all things digital. This toolbox helps people in India do things like spending money, getting loans, and even accessing healthcare more efficiently. IndiaStack is like a magic wand that’s making digital life in India more convenient and affordable for everyone.
Energy
India is improving its energy system, and a lot of it will come from clean sources like wind and solar power. This is not only good for the environment but also helps create new jobs and opportunities.
So, why should you care? Well, if you’re thinking about the ongoing volatility in the Indian market, think again. We believe the markets are as usual, and there will be risks like anywhere else, but India’s growth story is looking exciting. So, keep an eye on India’s journey!
Should you wish to start your journey now, feel free to connect with us at research@edufund.in
