India's future is bright
- Enviable GDP growth: India could achieve 9.5% nominal GDP growth in the decade ahead. (1)
- Youthful demographics: India will add 110mn workers by 2030; one-fifth of the world’s working-age population will be Indian. (2)
- A mature tech sector: India’s IT industry is one of the biggest globally by revenue.
Challenges to overcome
- Investment needed: To reach full potential, we estimate infrastructure investment needs to rise from around 5% of GDP today to 7%–8%. (3)
- Small manufacturing sector: At 1.7%, India’s export share of the global market (4) is a tiny fraction of China’s (approx. 13%).
- More reform heavy lifting needed to entice investment, upskill the labor force, and build a more robust manufacturing base.
Asset class implications
- Equities: Earnings to grow 11.5% on average each year from 2021 to 2030, according to our forecasts, with financials (14.5%) and infrastructure (16.7%) leading the pack. (5)
- Bonds: We think India’s BBB rating looks secure, IG space has room to grow, and HY defaults should remain relatively low. (6)
- Currency: The rupee should deliver attractive long-term returns thanks to its high yield, in our view. (7)