Every year India adds more to the world population than any other country does. The positive aspect of India’s population growth is that it is accompanied with an increase in the proportion of working age component. The dependency ratio in India has fallen to 56 per cent in 2010 versus 65 per cent a decade ago, and is expected to go below 50 per cent over the next decade. This would lead to higher savings underpinning investments and rapid economic growth.
In contrast, China’s dependency ratio is expected to increase from 39 per cent to 45 per cent over the next decade, suggesting that the high economic growth in China has actually peaked out. Over the next decade, while India’s economic growth will be on a sharp upswing, Chinese growth rates will taper-off considerably. This demographic dividend will make India amongst the most sought after destination for global investors.
Domestic consumption on the back of favourable demographics is the key driver behind India’s growth story, with around 80 per cent of India’s GDP being consumed within the country. Some of the sectors that can benefit out of this consumer boom would be FMCG, pharmaceuticals, automobiles, banking and finance, etc. These sectors will show higher than average sectoral growth rates.
With the demographic shift the lifestyles of both rural and urban India will also undergo a big change. As Indian families go nuclear there will be an increased demand for housing, consumer durables, automobiles and financial services. Urban Indians have emerged as major spenders with things like vacationing, branded clothes, investing on new gadgets and buying the latest car. Meanwhile, the rural demand for goods and services is also growing at a scorching pace. As the entertainment-internet revolution spreads further to the rural areas, there has been a direct impact on rural consumer demand. Amid the changing lifestyles of the Indian rural class, which form 70 per cent of India’s population, bullock carts are being replaced by tractors, and bicycles are being replaced by motor cycles.
If one were to go back a decade, none would have dreamt that the Indian GDP would grow at rates of 8-9 per cent or that the BSE Sensex would ever touch 10,000, let alone 20,000. Today, it is not inconceivable to think that over a decade from now, it may stand at several multiples from the current level, if the current trends along with resultant economic benefits spans out. The changing demographics of India present a wonderful opportunity to the nation to rise from decades of poverty. For the marketers it provides a mouth watering opportunity to cater to the needs of 1.1 billion aspirational Indians, while for the foreign investors it provides a fantastic window of opportunity to the last big emerging economy which should touch a GDP figure of $5 trillion in the time to come.
The author is CEO, ASK Investment Managers