Saturday, March 27, 2010

The Next 10 Years Could See The Indian Economy Growing By Four Times, With Domestic Capital Leading The Growth ..........


The Next 10 Years Could See The Indian Economy Growing By Four Times, With Domestic Capital Leading The Growth
Naresh Kothari

INDIA has come a long way since the economic reforms in 1991, moving from rates of 5% into the orbit of 7-9% growth rates. However, how many of us really know the scope and scale of this story and how it pans out over the next 10 years? At Edelweiss, we tried to estimate this growth, and the numbers are staggering.

We have assumed Indian gross-domestic savings at around 35%, an incremental capital output ratio of four as in the past decade, inflation of 4% and a marginal current account deficit of 2%. These assumptions lead us to a real GDP growth rate of 9% and a nominal growth of 13%. By 2020, India’s GDP is likely to quadruple from the current $1.1 trillion to about $4.5 trillion. Per capita income is likely to triple from the current approximately Rs 50,000 to over Rs 1.5 lakh. The number of households with income of more than Rs 16 lakh will be over 18 million, while the number of middle class households (income between Rs 1.5 lakh and Rs 16 lakh) would grow by 50% to 180 million. Number of deprived households (with income below Rs 1.5 lakh) is likely to be reduced by almost 25% to 100 million. Indian consumption is likely to increase 3.7 times to about Rs 113 trillion, with discretionary expenditure likely to increase significantly. According to our estimates, the education sector will grow 5.7 times, domestic pharma and healthcare six times, media and entertainment five times and organised retail 6.3 times. The automobile sector is likely to grow 4.8 times, while urban premium housing will grow 6.5 times.

By 2020, we expect total savings to be about $1.4 trillion — more than our current GDP. The massive growth in savings will propel a 5.3 times growth in banking, 4.7 times in broking, 5.7 times in asset management and 4.7 times in life insurance. There are three key risks to achieving and managing this growth. Execution of planned infrastructure projects remains an area of concern, inflation is another. The third risk to growth is the inclusion of lower income segments. With a Gini index of 36, the income disparity levels in India are amongst the highest in the world. It’s important that the bottom of the pyramid participates in the growth process.

However, in the past decade, we have grown at 7.2% with 5% inflation and carried out significant reforms despite pulls and pressures of a democracy. We see no reason why this can’t continue for the next 10 years. In fact, I am personally confident that our projections may well prove to be underestimates.

(The author is president at Edelweiss Capital)

My Comments:

Can anyone imagine what can be the ratio for Industries if Indian economy grows 4 times in just a decade?Where can be the Ind earnings and where can be the SENSEX?
This is written by no other then the president of a very reputed and wellknown brokerage firm.....

I just  read the news that , in Feb ,Core sector growth was just 4.5% lowest in last 4 months.... and now I am expecting our beloved bear...Mr.Shankar Sharma should come on CNBC anytime to repeat again his target of 12k any time soon..!!!!!!!!.............???????????I bet, he will be coming soon on CNBC ........he is just waiting for such news......I have not seen him since long....

I don't know what analyst thinks and what people tends to believe.....I have always written, read as much as you can and make your own view....for how much long you will follow others?
Create your own conviction and for that do whatever needs to be done, explore  through internet......but when readers here do not able to read my blog properly how I can expect them to read something else?I write this because ,I still see them asking about my LT picks or my favourite picks......asking about stocks which I have already discussed.......
Well, one need to be very focused.....that is the bottomline....
One more thing I would like to write it here.....about Srei Infra.....The news of Quippo merging with Srei Infra was brewing since long ..we may not be knowing that  but it must be there in the I would like to ask...who were the sellers in Srei Infra around that time?
While going through the bulk deal around Jan/Feb/Mar 2010....I am seeing the name of
1)Pca India Infrastructure Equityopen Limited SELL( 9,40,972 /Shares) @69.69
2)Prudential Asset Management (singapore) Ltd A/c Pca India In SELL (10,00,000/Shares)@ 69.25
These 2 bulk selling took place on 29 th Jan '10 the total selling by these 2 funds were of 19.40 lacs shares...

29-Jan-2010 SREI Infra (NSE) Ashika Credit Capital Limited BUY 600000 70.32

27-Jan-2010 SREI Infra (NSE) Ashika Credit Capital Limited BUY 825000 80.74

and Ashika Credit bought around same time 14.25 lacs shares around same tiime.......
and after that Rakesh Jhunjhunwala bought Srei Infra in 2 traches  of 6.25 lacs shares...on 26 feb 10 and 2nd Mar'10..means on Fri and Monday the next trading day......
I would like to know what was the reason that those two funds found wrong in Srei Infra?Was something wrong in the merger ratio?Was the Valuation of Quippo was estimated high by the managment?Why they sold it in such a big quantity and making loss of future as we all know when RJ buys, it usually is a multibagger...then what was the reason those fund sold Srei Infra?Who took that foolish decision to sell Srei Infra in that fund and that too in such a big quantity?
What I wants to convey is,don't rely on anyone........


  1. dear rajivji
    please advise any best pick in education sector:
    aptech/niit /everonn or any other in this sector.

  2. Rajivji

    RJ bought SREI on 26th Feb which was budget day. There is no doubt that RJ is great visionary. Which announcement prompted him to buy SREI which happens to be NBFC. Is it the new banking license announcement? Perhaps.SREI is hovering around 70-75 range and may breakout on upperside any day (like NELCO a few days back and AEGIS on Friday.

  3. Sandeep,
    I myself missed Edserve at 46....I even wrote to someone about it in a reply but I missed it myself....any way....
    I think DMC Int has also ventured into E-learning.....see all the annoucement at bse...
    This maybe a hype and all stock may not deliver...but we need to capitalize on hot sector and sell them as soon as stocks gets double....

  4. Hi Shyamaprasad,
    I think there is many more thing then just banking licence in Srei Infra...just try to read all comments by readers on last 3-4 or 5 post of mine....I have been recomending Srei Infra since over a year and more....