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Renuka Ramnath – The New Bharat: a US $5 Trillion Aspiration

Investment Outlook , Published Feb 18, 2020

5 min read



India can achieve its goal by unlocking its demographic dividend, focusing on new sectors, boosting its digital revolution and investing in infrastructure. This will generate innumerable wealth creation opportunities for investors and HNIs.

India has been one of the fastest-growing economies of the past decade. It took us 61 years to become a US $1 trillion economy and eight years to add the next US $1 trillion. At US $2.8 trillion, we now aim to join the US $5 trillion club by 2024 and to become the third-largest economy in the world.

Achieving such growth (of almost 12 percent p.a. in nominal terms) will require exceptional structural focus. We will need to unlock our demographic dividend, focus on new sectors and markets, leverage our ongoing digital revolution and invest in infrastructure alongside the support of stable governance and strong policy framework. Let’s look at the key drivers and challenges before us as we chase our ambitious target:

  • Unlocking Demographic Dividend:
    • Leveraging Millennial Population: Considering 29 as the average age of an Indian citizen, we have a large population of the young and aspirational in the country. By 2024, the number of millennials alone in India will be twice the total population of the US. The key challenge will be to train this population and provide them with opportunities and jobs to reap the benefits of demographic dividend.
    • Increasing participation of women in the workforce: Only 23 percent of women participate in India’s workforce. This can change with increased focus on inclusion of women in the workforce by shifting attitudes to ensure better gender balance. This will significantly improve household income and savings, adding an estimated ~$800 billion to our GDP by 2024.
  • Focusing on new sectors and new markets
    • Emphasis on Manufacturing: Manufacturing has been the bedrock of growth for almost all economies globally with China, Japan, and Korea being big beneficiaries of it in the last 50 years. `Make in India’ is a significant step to put India’s manufacturing sector on the global map. Increasing manufacturing and labour costs in countries like China present huge opportunities for India to attract foreign capital to the manufacturing sector. The government’s focus on making India an investment destination for manufacturing is commendable but leaves scope for other opportunities.
    • Contribution by exports to GDP: Exports is another area that can significantly boost our economic growth and take us past the US $5 trillion target by 2024. Apart from IT, India’s growth in the past two decades has been led by domestic consumption. Along with the $5 trillion target, we must set ourselves on the path of achieving US $1 trillion in exports by 2024 – this will need more dedicated export parks, investments in a logistics ecosystem and strong negotiations on tariff barriers by the government.
    • Agriculture 2.0: As India charts out its growth path, it needs to financially include its predominantly rural, agrarian population with better MSPs for agricultural produce, investments into post-harvest management and incentives for the food processing industry, which can help improve farmer income, rural employment and exports of value-added agricultural products.
  • Digital Revolution:
    Non-linear growth opportunities: India’s digital ecosystem has already spawned into a mini economy of its own – from the gig-economy, social e-commerce, Edu-tech to enterprise solutions. With the number of smartphone users expected to rise to 700 million by 2024, India has a large user base which can be at the helm of global innovation and boost our GDP in the next five years.

The New bharat image

India continues to chart upon the parameter of ease of doing business (from being ranked 142nd in 2014 to 63rd in 2019). Additionally, a strong governance framework provides solutions to transform ‘Bottlenecks’ to ‘Enablers’. GST, Insolvency and Bankruptcy Code, reduction of corporate tax rates are landmark reforms which will have a big bearing if we give them time. India will continue to reform as a key agenda, with even better (de)regulation and execution to attract investments and innovation.

What does this mean for the Private Sector?

From an opportunity perspective, the journey towards a US $5 trillion economy will provide innumerable opportunities to participate in wealth creation. As highlighted in the economic survey, India will need significant participation from private investors to boost investment and GDP.

This will result in more companies seeking investments, higher fundraising activities and the formation of newer asset classes as more money than before is invested in India’s economy. Further, the government has exempted startups from incurring angel tax, pushed for the development of bond market and relaxed FDI sectoral caps – providing greater opportunities for investors. Alongside, the market has reacted favourably towards innovative investment opportunities including Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs).

Amid the dynamic entrepreneurial landscape brimming with first-time entrepreneurs, innovative startups focused on solving problems specific to India, and companies choosing to pursue growth, private risk capital is expected to dominate the investment landscape. In 2019, India recorded its highest private equity (PE) investment ever – with US $37 billion invested across 700+ companies.

Abhay Soi

From an opportunity perspective, the journey towards a US $5 trillion economy will provide innumerable opportunities to participate in wealth creation.

However, even at $37 billion, PE investments in India are still at 1.3 percent of GDP. (Relatively, PE Investments in US are at ~3.0 percent of GDP).

With long-runway for growth of PE investments in India, PE/VC fund managers outperforming public market peers/index and keeping in mind the ever-growing role of PE in the development of the Indian economy, HNIs and investors would be well placed to invest in PE/VCs and participate in the structural growth story of India.

Finally, I believe that as the juggernaut of the Indian economy continues, it’s not just about becoming a US $5 trillion economy till 2024, or a US $10 trillion economy by 2030. The real question is can India continue to grow at 8-9 percent year after year for the next two-three decades? Along the way, there will be innumerable opportunities for investors and HNIs to leverage wealth creation opportunity.

About Renuka Ramnath

Renuka Ramnath is the Founder, MD & CEO of Multiples Alternate Asset Management. Prior to founding Multiples in 2009, Renuka built several businesses in the ICICI Group including the investment banking, e-commerce and private equity businesses.

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