Demographic advantage: With a population of 1.2 billion and a median age of 27, India looks to have a labour cost advantage for the next several decades. Indian companies will be able to leverage that lower cost of human capital to compete in the global economy and to provide goods and services to the growing demand within India
HISTORICAL AND PROJECTED SHARE OF GLOBAL GDP (PPP BASIS)
Source: Quantum Advisors, IMF, Angus Maddison, University of Groningen
Steady growth irrespective of who’s in power: Over the past three-plus decades, despite 10 different governments (of which 7 were coalitions), India's GDP has grown at 2x the average of the global economy. This higher growth rate is expected to sustain for the next few decades, and we expect 6.5% to be a reasonable long term assumption for India’s Real GDP Growth.
This superior long-term GDP Growth profile should translate into a superior long term earnings profile
Source: Quantum Advisors
Disclaimer: The figures mentioned in the above table are based on the assumptions and estimates made by Quantum Advisors Pvt Ltd. “An intelligent portfolio” mentioned above refers to a portfolio constructed by an investment manager following an active approach to investing with an appropriate research and investment process in selecting stocks. These growth rates or indicative rate of returns may or may not be achieved.
This superior long term earnings profile should be matched by a higher long term Price to Earnings ratio, presenting a unique opportunity for long term, patient investors in equity products.
Investors in real estate assets will also benefit from the increasing demand for quality residential, commercial, and lifestyle and leisure developments and the growing ability of Indian consumers to pay for various products and services.
India's under-developed fixed income markets will give investors who prefer limiting their downside an opportunity to earn higher coupons on selective paper of companies whose growing businesses suggest that the risks of defaults are limited.