Page 32 - DIY Investor Magazine | Issue 33

INDIA: A FUTURE LEADER IN E-COMMERCE AND TECH PLATFORMS?
Kevin Carter, manager of FMQQ Next Frontier Internet & Ecommerce ESG-S UCITS ETF (FMQQ)
You cannot talk about the investment case for India without first mentioning the country’s rapid economic growth. India’s economy grew at an average rate of 7.7% in the past two decades.1
The country’s economy is also rapidly recovering from the pandemic-induced contraction. India’s economy grew by 8.4 percent year-on-year in July-September 2021 after a record 20.1 percent growth in the previous three-month period.2
This growth has also been accompanied by a massive rise in incomes that has lifted hundreds of millions out of poverty, adding to the global middle class3.
According to a study by Brookings Research, India only accounted for 5% of the global middle class as of 2015. However, that percentage is estimated to grow to 9% in 2020 and 17% in 20304.
With this comes rising consumption. India has been showing steady consumption growth for several years. It is expected that consumption in India will triple by 2030.
According to Boston Consulting Group, “growth has
been driven by strong fundamentals - increasing share of affluent and elite households, urbanization, nuclearization of households and increasing Gen-I population with higher appetite to spend.”5
‘IT IS EXPECTED THAT CONSUMPTION IN INDIA WILL TRIPLE BY 2030’
India is also increasingly coming online. In 2019, a report found that over 500 million Indians own smartphones. That was an increase of 15% from 2018, largely due to due to the growing availability of cheaper brands such as Xiaomi and Realme.6
Our own projected rate of smartphone adoption stands at approximately 4,000 freshly minted smartphone users in India every hour, representing a significantly growing user base for companies to capture.
On top of that, there are now 560 million internet users in India, making it the second largest online market in the world, second only to China. It has been estimated that by 2023, that number will grow to 650 million.
So here we have two trends. First, a population getting wealthier, with higher incomes and ability to spend on consumption. Second, a population that is increasingly connected and online.
Taken together, this suggests the potential for greater consumerism in general, and strong growth in commerce specifically. Just as our consumption patterns have changed via the internet and smartphone, so too are those in the developing economies of the world.
1 Next 10 years make-or-break decade for Indian economy: Economists - The Economic Times (indiatimes.com) 2 India GDP Annual Growth Rate | 2022 Data | 2023 Forecast | 1951-2021 Historical (tradingeconomics.com)
3 The World Bank https://www.worldbank.org/en/country/india/overview
4 global_20170228_global-middle-class.pdf (brookings.edu)
5 bcg-rai-report-retail-resurgence-in-india.pdf
6 Smartphone Users in India Crossed 500 Million in 2019, States Report (news18.com)
DIY Investor Magazine · Apr 2022 32