Missed the fastest growing USD 1 trn+ country in the world? India’s GDP has grown at ~12% nominal USD CAGR over the last 5 years and is now the 4th largest major economy in the world. Savings pool at USD 1.1 trn is now half of our 2017 GDP and consumption at USD 2.4 trn is as large as our GDP5 years ago. While there were some hiccups on the way, policy focus ensured our market became the 4th largest in the world in FY22: 70K/22K Sensex/Nifty.

What drove this?

India’s transformation was driven by SEVEN important achievements: (1) Electricity for All, (2) Housing for All,(3) Rural transformation, (4) defense indigenization,(5) formalization of the economy driven by digital infrastructure (100% population with biometric identity linked to bank accounts and mobile devices with internet access), (6) USD 1 trn infra push, and (7) Growing competency in labor-intensive manufacturing. Each of these drove investments and spurred consumption.

Who benefited? Incremental 2.5 trn USD market cap got created for India between Jan-18 to 2022 to ~USD 5 trn led by…

Consumer discretionary: benefited as the income curve flattened with more households entering the middle class segment. Consumerism scaled up on rising aspirations and easier credit availability with basic infra in place. Housing, education, lifestyle & leisure benefited the most. Consumer staples underperformed.

Financials: were the best route to play the India growth story as 100% population is biometrically mapped and linked to their bank accounts to mobile phones to all investment avenues. This led to credit expansion. NCLT, PSU bank reforms, and capital raise ensured asset quality woes were behind us.Financialisation of Savings drove inflows to insurance and mutual funds. New listings helped expand the share of market cap.

Industrials: Huge infra push of 1 trillion USD ensured completion of basic connectivity infra like 35K kms of roads, dedicated freight corridor, 60 smart cities, housing for all, electrification, T&D modernization, and defenceupgradation. With such a large convergence gap, investment cycle had to turn and it did. Policy reforms ignited animal spirits given the base of macro stability (moderate inflation; twin deficits in control) and favorable demographics (growing working age population). As the infra pie was scattered among multiple players across segments, financials proved to be the best way to play this opportunity.

IT and e-commerce: India continued to lead services deflation globally helped by reskilling of the workforce. Enterprise spending picked up driven by new technologies like digital, cloud, IoT etc. Indian e-commerce market has come of age with the listing of key players like Flipkart.

Real Estate: Shift from unorganized to organized developers accelerated post RERA. REITs and Invits drove higher investments and expanded the share of market cap. Note: The market cap of this sector was negligible till some years back unlike China which had 600 bn+ USD market cap in 2017.

Note: We have written this report as a flash back, as if reminiscing in 2022 about India’s delectable journey from 2017.