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I N V E S T I N G I N

INDIA:JULY 2016

T H E F A S T E S T G R O W I N G M A J O R E C O N O M Y

A White Paper by Tristar Capital

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2For more information contact:

JOHN PEREIRAManaging Director

Tristar Capital Pty Limited T +61 3 9621 2160E jpp@tristarcapital.com.au

www.tristarcapital.com.au

DISCLAIMER – Investing in India

This publication is issued by Tristar Capital Pty Ltd (ABN 86 112 516 846) (“Tristar”). Tristar have made every effort to ensure that the information in this publication is accurate. However, its accuracy, reliability or completeness cannot be assured. To the maximum extent permitted by law, Tristar does not accept any liability for any error or omission or for any loss or damage suffered as a result of others acting on the basis of the information contained in this publication. Copyright in this document is owned by Tristar. Its contents may not be copied, reproduced or embodied in any other document or distributed to a third party without the prior written consent of Tristar.

The information contained in this publication is not investment, tax, accounting, legal or financial advice and is not intended to be used as the basis for making an investment decision. This publication has been prepared without taking into account the investment objectives, financial situation or particular needs of any particular person.

Certain statements in the publication constitute ‘forward looking statements’ that are based on expectations, estimates and projections as of the date of this brochure. These statements are subject to risks and uncertainties. The forward looking information should not be relied upon as representing the view of Tristar after the date of the publication. Tristar has attempted to identify important factors that could cause actual actions, events or results to differ materially from those current expectations described in the forward looking information. However, there may be other factors that cause actions, events or results not to be as anticipated, estimated or intended and that could cause actions, events or results to differ materially from current expectations. There can be no assurance that the forward looking information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, the reader should not place undue reliance on the forward looking information. These factors are not intended to represent a complete list of the factors that could affect the forward looking information.

This publication is for general information purposes only and is not intended to be a definitive statement on the subject matter.

Sources used in compiling this document can be found on the inside back cover.

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The idea of India‘Astonishing thought: that any culture or civilisation should have this continuity for five or six thousand years or more; and not in a static or unchanging sense, for India was changing and progressing all the time,’ Jawaharlal Nehru, The Discovery of India 1945.

India has the capacity to become a world leader on so many levels and in so many sectors – it is a vibrant nation on the cusp of greatness. Both the World Bank and the IMF predict India will be the world’s fastest growing major economy in 2016.

But, often our first notion of India is of population – which is seen as a burden rather than the reality of the “demographic dividend”. Or perhaps we first think of its vast geography or even contemplate it as a mystery destination. These impressions can too easily become fixed thoughts and although at certain times in India’s long history they may have been true, they now require serious revision.

As the quote from India’s first Prime Minister tells us, this is a country that progresses constantly – a nation of so

many beliefs, races and provinces yet successfully built on change while making its inhabitants ‘throughout these ages distinctively Indian, with the same national heritage and the same set of moral and mental qualities’. Its antiquity guarantees continuity, its diversity creates unity, its population demands democracy(a).

This paper seeks to challenge some misconceptions on India. It introduces you to a vibrant nation on the cusp of greatness – economically, socially and geo-politically. India, like many modern democracies, experienced difficulties in its creation, however within a few years (the blink of an eye in Indian history) it achieved unity and national common goals.

This paper intends to emphasise

‘Both the World Bank and the IMF predict India will be the world’s fastest growing major economy in 2016.’

India is home to three of the world’s top 15 megacities(v).

that India’s opportunity is now a global opportunity. Its capacity, briefly outlined, to become a world leader on so many levels and in so many sectors is unchallengeable. It is hoped that this foretaste of India approaching 2020 creates a new vision of the idea of India.

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KEY STATISTICS:

1,251.7millionIndia’s Population 2015.

3.3 million SQ KMLand area 3.3 Million sq km (approx. 42.8% the size of Australia).

Major languages spoken Hindi, Bengali, UrduTelugu, Marathi, Tamil, Gujarati, Malayalam, Kannada, Oriya, Punjabi, Assamese, Kashmiri, English, Sindhi, and Sanskrit.

With almost half the population under 24 years of age this generation is better educated, ambitious and more acquisitive than older Indians(c).

Contents

3 The Idea of IndiaA challenge to the mind and to existing preconceptions.

5 SummaryIndia’s momentum for change is driving investment opportunities.

7 Government reform in brief An historic mandate allows the Modi government to dramatically reshape the nation’s economy.

8 Gross Domestic Product in briefGDP growth has been strong for many years and is expected to continue in the coming years.

10 Economic snapshotThe prospect of investment potential in securities and equity markets is diverse and appealing.

12 Investment opportunityAustralian investors are generally underweight in their Asian investments and specifically have little direct investment in India.

17 Demographic dividend A youthful population and exponential growth of the middle classes will build India’s success over the coming decades.

18 ConclusionIndia’s progress in economic and human development terms is one of the most significant global achievements of recent times.

Lotus Parkscape Yamuna Expressway.

Sources (b),(c),(e),(f)

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SummaryThe potential of India has been unleashed over the last 18 months driven by the reforms and initiatives of the Modi Government. A major and long overdue restructure of the economy has seen a flood of investment expand the nation’s capacity for growth.

While previous governments have stalled and balked at the reforms necessary to build the economy, Modi’s mandate and record have inspired not just the nation but the investment world to sit up and take notice as he reshapes a new India.

The shift in global economics is already apparent with key international financial bodies acknowledging the twin Asian powerhouses – China and India - as the future drivers of world prosperity. Indeed The Economist (ab) states that with the rest of the world financially languishing investors can draw strength from ‘India’s strong growth prospects.’

Fortune (ac) recently noted that both nations will soon have the world’s largest middle classes and that Modi has already racked up significant successes including the opening up of ‘more sectors to foreign investment and companies can now obtain many licenses and permits online, making the process faster and less susceptible to corruption.’ This positive shift in bureaucratic process has been complemented by government investment of $52 billion in new roads, rails, airports and ports for 2016 .

With India’s stellar growth rate estimated by the World Bank at 7.8 percent for 2016/17 (ad) it is outstripping China’s for the first time. A further economic boon came from

the drop in international oil prices. The Economist has described the social changes by Modi as ‘transformational’ and that combined with policy progress in finance has lead Bloomberg to identify India’s high speed economy as a major drawcard for foreign investors.

There is still much structural work to be done in reforming India’s economy but most leading financial sources recognise that significant progress is under way. It is now widely accepted that India is open for business on a global scale.

Red tape is being cut, improvement in the World Bank’s ease of doing business ranking, a recent Ernst & Young report found that more than twice as many

Total 2015 mobile phone connections 1.018 billion.

India has the third largest armed forces in the world.

1.018billion 496.9 million

$11.2 billionIndian labour force 2015 487.3 million.

Total trade with Australia 2013-14 – $11.2 billion. India is Australias 4th largest export market.

The Indian biotech industry will grow at an average growth rate of around 30% a year and reach US$100 billion by 2025.

‘The shift in global economics is already apparent with key international financial bodies acknowledging the twin Asian powerhouses – China and India - as the future drivers of world prosperity’

Foreign investment has been attracted by India’s strong year-

on-year GDP growth.

senior global executives picked India over China as their top investment destination for the next three years and CLSA’s chief equity strategist, Christopher Wood, stated (af) that India represents ‘the most promising major emerging market story on a five- to 10-year view globally.’

Modi’s Make in India initiative will see the nation create a vast global manufacturing hub overtaking China’s predominance in this area of economic activity. Bloomberg (ag) notes it has ‘attracted $400 billion-plus worth of overseas investment commitments’ which is more incoming investment than the past 14 years. It further states that the governments intention to create 100 million new factory jobs by 2022 and increase manufacturing’s share of the economy to 25 percent by 2022 from about 18 percent.

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Gurgaon lights up. With a production of 1108 TW, India is the world’s fifth largest producer and consumer of electricity with a total demand of 1905 TW expected by 2022.Recent in-bound

investment stories include:

Japan’s Softbank to invest US$10 billion in India.

$10 billion

China to invest US$20 billion in infrastructure over next five years.

$20 billion

Facebook’s Mark Zuckerberg looks to work with PM Modi on connecting villages in India.

Modi’s Make In India program is already attracting many multinational corporates keen to invest and expand in India.

US to invest US$4 billion in India.

$4 billion

• Donald Trump and Amazon to make substantial investments in India.

• Suzuki to invest US$500 million in Gujarat plant.

• Japan to invest US$35 billion in infrastructure projects.

• US to enter into bilateral investment treaty which may lead to bilateral trade estimated to US$100 billion.

• Oman’s sovereign fund to establish US$250 million corpus, JV with SBI for ‘Make in India’.

Source: Ernst & Young Indian Budget update(g)

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amending India’s archaic labour laws; energy policy redevelopment which will allow the nation to maintain its sovereign credit rating; FDI liberalisation and the financial inclusion measures which will allow more than 75 million households to participate in the economy through the establishment of bank accounts and insurance schemes.

A singularly outstanding accomplishment is the absence of corruption allegations. A constant in Indian politics for decades The Economist ranking of the wealth of crony capitalist saw India’s drop from 18 percent to 3 percent – a long-awaited maturity in governance lead by a transforming administration (ah) (ab).

The Modi record is one of substantial progress. It is worthwhile to consider how this progress has been achieved in a sprawling and vibrant democracy of over a billion people.

Government reform in briefThere has been wide praise of the Modi government’s pace of reform in its two year reign. Its pledge to “to cut red tape, raise infrastructure investment, deregulate key parts of the economy, and shrink the role of government” (p) has been strongly and forcefully implemented in many key areas. While there is still some resistance to key reforms the Modi government coalition NDA (National Democratic Alliance) has according to the 2016 Greater Pacific Capital (GPC) Sign of the Times New India Story report ‘made tangible progress in reviving India’s economy.’ (aa)

This report identifies key strengths that will allow the proposed reforms to take immediate effect. The Sign of the Times New India Story report named 45 key policy areas of successful reform in the following areas: manufacturing; financial inclusion; infrastructure; agriculture; healthcare; energy; skills development; welfare; innovation; and tourism.

The Centre for Strategic & International Studies (CSIS) scorecard on Modi reforms (ae) noted the degree of difficulty in many of the 30 identified policy areas but clearly states that two thirds have been achieved or are in progress or partially complete.

The CSIS scorecard (ae) detailed significant modernisation processes announced in the February 2016 Budget speech by Finance Minister Arun Jaitley. These changes included deregulation in the energy sector including diesel and natural gas and access to the coal mining sector to private/foreign investment, the allowance of more than 50% foreign investment in insurance firms, defence production entities, railway-related businesse and a major opening up of retail sector to foreign investment.

Further research undertaken by GPC (aa) reveals the extensive diplomatic initiatives undertaken by Modi including several important multilateral and bilateral achievements. The momentum of these changes has had the effect of increasing the flow of capital from abroad.

The New India Story (aa) outlines seven key areas of economic policy and legislative reform. These major achievements include addressing and

‘‘...more than 75 million households to participate in the economy through the establishment of bank accounts and insurance schemes.”

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Gross Domestic Product in brief

India is the largest democracy in the world, and has experienced consistent economic growth over the last decade.GDP growth has been consistently strong for many years and will remain so in the coming years; inflation continues to decrease with the IMF expecting the 2015 rate to be at or below 7.5%(f) and unemployment rates continue to plateau.

GDP Growth – World LeadersSource: IMF World Economic Outlook(k)

Average GDP growth is on the rise, according to Indian government sources.

India’s GDP exeeded US$2 trillion in 2015 with a growth rate averaging 7.3% over the past ten years.

The International Monetary Fund (IMF) forecast GDP growth for 2016 to increase to 7.8% overtaking China.

GDP growth has been more than double that of Australia and is projected to be so for some years to come.

India’s continuing relatively high GDP growth is increasing its proportion of global GDP, such that it now accounts for over 6.8% of the world economy in comparison to Australia’s 1% share.

For India, falling crude oil prices are a major benefit for the economy (India is a net importer of oil) assisting in macro-economic management (both budget and fiscal) by improving macro fundamentals (inflation, fiscal deficit and current account deficit).

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GDP Growth – Asia Pacific LeadersSource: IMF World Economic Outlook(k)

IndiaChina

India was the fourth largest consumer of crude oil and petroleum products in the world in 2013, after the United States, China and Japan(b).

3.1.1 GDP Growth

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Share of World GDP (Based on purchasing power parity)Source: IMF World Economic Outlook(k)

2015 GDP 2015 Rank

Country Int. $bn (Actual)China 19392.4 1United States 17,947.0 2India 7,965.2 3Japan 4,830.1 4Germany 3,840.6 5Russian Federation 3,717.6 6Brazil 3,192.4 7United Kingdom 2,679.3 8France 2,646.9 9Italy 2,170.9 10Canada 1,631.9 11Australia 1,138.1 12

GDP World RankingsSource: IMF World Economic Outlook(k)

Global corporations view India as a vital market for the future.

India has a young demographic and a middle class with rising disposable income.

If the country can sustain its current pace of growth – and that is likely – average household incomes will triple over the next 20 years and India will become the fifth largest consumer economy in the world by 2025, McKinsey Global Institute (MGI).

India: a vital market

Infrastructure with Modi-nomics

The economic successes Modi brought to Gujarat state in his time as Chief Minister were driven by infrastructure – the state is a surplus producer of energy with 18,000 villages on the grid and water supply is abundant(i). Building on this success, Prime Minister Modi announced that everyone in India will have 24/7 electricity by 2022. To tackle the challenge while exploring alternative sources of energy has become a development priority for the government(l).

His energy project aims to harness solar power and develop offshore wind energy in order to provide electricity to every household by 2022(l).

There are already success stories in this field. Towns in the province of Gujarat are employing and have added power generating capacity, developed contractual models for other solar projects, and have demonstrated the technical and economic feasibility of rooftop-based solar power. India Prime Minister Narendra Modi.

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Mobile technology is one of the keyforces driving the Indian economy.

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Economic snapshot:

One of the Modi government’s first reforms was to increase the proportion of ownership permitted by Foreign Portfolio Investors (FPI) including:

Sectors which have attracted highest FDI inflows in recent years.

Sectors attracting highest FDI Equity Inflows: Amount in US$ in million.Source: Ministry of Commerce & Industry(m)

(i) ** Services sector includes Financial, Banking, Insurance, Non-Financial / Business, Outsourcing, R&D, Courier, Tech. Testing and Analysis. (ii) Cumulative sector-wise FDI equity inflows (from April, 2000 to January, 2015) are at – Annex-’B’.(iii) FDI sectoral data has been revalidated / reconciled in line with the RBI, which reflects minor changes in the FDI figures (increase/decrease) as compared to the earlier published sectoral data.

• Up to 49% in the defence sector.

• Up to 100% in the railway sector.

• Up to 49% in the insurance sector.

Foreign investment &

Ranks Sector2012-13 (April-March)

2013-14 (April-March)

2014-15(April 14-

January 15)

Cumulative Inflows

(April 00-January 15)

% age to total Inflows (In terms of

US$)

1 Services Sector ** 4,833 2,225 2,642 42,101 17%

2Construction Development: Townships, Housing, Built-up Infrastructure

1,332 1,226 722 24,028 10%

3Telecommunications (Radio paging, cellular mobile, basic telephone services)

304 1,307 2,832 16,995 7%

4 Computer Software and Hardware 486 1,126 1,308 14,125 6%

5 Drugs & Pharmaceuticals 1,123 1,279 1,259 12,856 5%6 Automobile Industry 1,537 1,517 2,045 11,857 5%

7 Chemicals (Other than fertilizers) 292 878 562 10,230 4%

8 Power 536 1,066 612 9,512 4%9 Metallurgical Industries 1,466 568 406 8,481 4%10 Hotel & Tourism 3,259 486 656 7,774 3%

The Indian Railways network spans more than 64,600 kms, making it the world’s third-largest rail network.

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Sectoral Long-Term Valuation Snapshot*Source: Bloomberg(n)

Markets consolidated during 2015 and both foreign institutional investors (FII) and domestic institutional investors (DII) were net buyers.

This graph gives a snapshot of the sectoral long-term valuations and while few sectors like FMCG, Pharma, Engineering are above their long-term valuation averages, broader markets valuations are within the long-term range.

Investment themes:Demographics led consumption• Rising per capita income,

media/internet foreign travel, post-liberalisation policies – driving aspirations

• Niche markets have become mass markets

• Large working age population (50% of population)

• Urbanization (33% of people live in urban areas)

• Robust rural economy

Financial Services • A play on India’s growing

GDP and rising penetration of financial services

• Low household borrowings• Well regulated financial markets

Outsourcing• India has strong intellectual

capital – amongst preferred destinations for outcourcing

• A win-win value proposition for customer and Indian service providers

• Proposition moving away from cost arbitrage to skill arbitrage with opportunities across the value chain

• Companies globally competitive

Infrastructure• Government focused on improving

execution bottlenecks• Monetary policy likely to be supportive• Indian companies show capability

to build large projects• Private sector share in investments

on the rise• High savings rate at over 31% of

GDP to fund growth

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TelecommunicationsWith the second largest market in mobile connections in the world, telecommunications showcases India’s growing technology supremacy and highlights the diversity of its mobile-enabled services. Over 1 billion mobile connections in India represent a third of all connections in the Asia Pacific, and by 2017 this figure is expected to rise to 1.16 billion. A 2015 report on India’s mobile economy, written by BCG, has predicted that by 2020 mobile technology: ‘...could contribute almost $400 billion to India’s GDP, creating 4.1 million additional jobs and generating significant contribution through infrastructure investment (US$9 billion) and public funding US$34 billion’(e).

Mobile technology is one of the key forces driving the Indian economy, contributing to increased productivity, creation of new jobs and businesses and increased public funding via tax revenues. The Modi Government commitment to reforming mobile policy will transform Indian society and the economy and will create vast new opportunities in sectors as diverse as health, agriculture, financial services and education.

investment markets

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Investors accept that diversification is a necessary part of portfolio construction for risk management and performance. The emerging market of India is now integral to this proposition. Yet Australian investors are generally underweight in their Asian investments and specifically have very little direct investment in India.

On a list of countries which contribute FDI into India, Australia ranks below countries such as France, Germany, the USA, Cyprus, Malaysia and Cayman Islands in its level of FDI(m).

This information reveals Australian investors have been slow in recognising the potential for diversification and long term growth from Indian markets.

The investment opportunity

Name of the country

Amount of FDI Inflows (In US$

million)% age with total FDI

Inflows (+)

1 Mauritius 83,729.92 35.412 Singapore 29,192.54 12.353 United Kingdom 21,761.27 9.204 Japan 17,556.86 7.425 Netherlands 13,664.81 5.786 U.S.A 13,285.88 5.627 Cyprus 7,915.87 3.358 Germany 7,133.56 3.029 France 4,408.64 1.8610 Switzerland 2,892.09 1.2211 UAE 2,886.05 1.2212 Spain 1,999.58 0.8513 Italy 1,527.40 0.6514 South Korea 1,516.98 0.6415 Hong Kong 1,281.16 0.5416 Luxembourg 1,123.71 0.4817 Sweden 1,070.42 0.4518 Cayman Islands 1,021.84 0.4319 Russia 944.05 0.4020 British Virginia 820.53 0.3521 Belgium 797.42 0.3422 Malaysia 724.92 0.31

23 Australia 635.76 0.27

Top Investing CountriesSource: Ministry of Commerce & Industry(m)

The general insurance business in India is currently a US$12.41 billion premium per annum industry and is growing at a rate of 17%(b).

Consumer MarketIndia could become the world’s largest middle class consumer market with a total consumer spend of nearly US$13 trillion by 2030, according to a report by Deloitte titled “India matters: Winning in growth markets”(o).

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Securities MarketAnother key to diversification is access to different sectors and companies which are unavailable in the Australian market.

Unlike the Australian S&P/ASX200 Index, which has a heavy weighting to financials and materials, the constituent companies of the Indian NSE (National Stock Exchange) 500 provide a broader exposure to all sectors of the Indian market.

Continued over page

The diagnostic market is the fastest growing segment of India’s healthcare industry, according to PricewaterhouseCoopers (PwC), with the segment forecasted to grow to US$17 billion by 2021(b).

Unlike Australia’s ASX All Ords Index, the constituent companies of the CNX 500 Index provide a broad exposure to all sectors of the Indian market.

Heath CareEnergyMaterialsUtilitiesTelecommunication Services

FinancialsInformation TechnologyConsumer DiscretionaryConsumer StaplesIndustrials

27.5%

12.6%

11.8% 9.4%

8.8%

8.5%

8.2%

7.6%

3.2% 2.4%

45.6%

6.6%

1.6%

7.0%

8.4%

6.8%

4.5%

11.8%

2.4%

5.4%

ASX All OrdsSource: ASX

CNX 500 SectorsSource: National Stock Exchange/ASX

In 2001, about 286 million were living in urban areas across India. It had the second largest urban population in the world. As per the Indian Census, 2011, the urban population had increased to 377 Million, representing growth of around 32%. It is estimated, nearly 590 Million people will live in Indian cities by 2030(p).

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S & P CNX 500 Index

KEY STATISTICS:

144 billionThe estimated size of the chemical market is US$144 billion.

The Indian automobile market is estimated to become the 3rd largest in the world by 2016 and will account for more than 5% of global vehicle sales.

Sources (b),(c),(o)

120 billionTravel and tourism contributed US$ 120 billion to the country’s GDP in 2015. This is expected to rise by 7.5% per annum.

The P/E Ratio of the CNX 500 Index averaged 17.6 times over the past 5 years.

Price Earnings Ratio (P/E) (RHS)CNX 500 Index Dividend 12 Month Yld (RHS)

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CNX 500 Index, P/E Ratio and Dividend YieldSource: Bloomberg December 2015

Indian securities markets include two major stock exchanges. They offer access to a more diverse range of sectors when compared with the ASX, which is heavily weighted to financials and materials.

The Bombay Stock Exchange (BSE), founded 1875 is Asia’s oldest exchange.

The National Stock Exchange (NSE), founded 1992.

India’s stock market performance is commonly measured via the CNX 500 Index, regarded as India’s first broad-based benchmark of the Indian capital market, according to the NSE. The index includes a selection of the NSE’s 500 largest and most liquid stocks. The index has performed strongly over the last 10 years:

Passengers alighting metro train in Delhi, India. Nearly 1 million passengers use the metro daily.

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64,600The Indian Railways network spans more than 64,600 kms, making it the world’s third-largest rail network.

India is the world’s fifth largest wind energy producer.

161 million

26.1 billionIndia has 161 million television households.

The generics market is expected to grow to US$26.1 billion by 2016 from US$11.3 billion in 2011.

India’s pharmaceuticals industry accounts for about 2.4% of the global pharma industry by value and 10% by volume.

Equities Markets in IndiaIndia has two principal stock exchanges, the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE) both operating in Mumbai (Bombay). Whilst the NSE commenced equity trading in 1994, BSE’s history dates back over 130 years, making it the oldest exchange in Asia. More than 90% of the top 50 Indian companies are listed on both exchanges.

Source: NSE, BSE, World Federation of Exchange members

BSE NSENo. of companies listed 4,592 1,745

Market cap (A$ bn) 2,076 1,896

Monthly turnover (Dec 15) (A$ bn) 12,140 65,761

Settlement period T+2 T+2

Financial reporting Quarterly Quarterly

All figures as at 31 December 2015

The BSE and NSE operate fully automated screen based trading systems and are open Monday to Friday, from 9.15 am to 3.30 pm IST. In addition, admission criteria consistent with global standards are in place and monitored through the Securities Contract (Regulations) Act 1956.

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MSCI ChinaMSCI India MSCI USA

Equities Market GrowthMSCI Index Performance Source: Tristar, December 2015

NOTE: Rebased to 100 at 1 January 2009. All indices are total return and in their respective local currency.

Bangalore city scape.

Passengers alighting metro train in Delhi, India. Nearly 1 million passengers use the metro daily.

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Company Name Sector NSE Market Cap 31 December 2015 A$ Bn

Tata Consulting Services Ltd Information Technology 99.0

Reliance Industries Energy 67.7

HDFC Bank Ltd Financials 56.3

Infosys Ltd Information Technology 52.3

ITC Ltd Consumer Staples 54.3

Coal India Ltd Energy 42.9

Sun Pharmaceutical Industries Heath Care 40.7

Oil & Natural Gas Corporation Energy 42.6

Housing Development Finance Co Financials 41.1

Hindustan Unilever Ltd Consumer Staples 38.5

State Bank of India Financials 35.9

Wipro Ltd Information Technology 28.5

ICICI Bank Ltd Financials 31.3

Maruti Suzuki India Ltd Consumer Discretionary 28.8

Kotak Mahindra Bank Ltd Financials 27.2

Bharti Airtel Ltd Telecommunications Services 28.1

HCL Technologies Ltd Information Technology 24.8

NTPC Ltd Utilities 24.9

Tata Motors Ltd Consumer Discretionary 26.3

Indian Oil Corporation Energy 21.4

The largest companies in the S & P CNX Nifty index are as follows: Top 20 stocks by Market Cap TickerSource: NSE(q)

‘Financial Year 2013-14 FDI equity inflows increased by 8% reaching US $24.30 billion.’

Chhatrapati Shivaji International Airport, in Mumbai, India.

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The “Demographic Dividend”

Urbanisation continues at a rate of 2.7% P.a. Between 2008-2013 its economy expanded by 53% in real terms, while the total population rose by 13% overall(t). Four of India’s cities with populations of five to 10 million are projected to become megacities in the coming decade and India will have seven megacities by 2030(v).

A growing middle class in the next decade will ensure a rapid rise in domestic consumption and GDP. The benefits in socio-economic terms will provide another spur to India’s economy.

India’s global middle class (millions of people)Source: Ernst & Young IEMS(w)

India’s demographics guarantees its role as a leading nation of the future. The constant comparisons to China are stark when demographic projections are

taken into consideration. A RAND Corporation(x) report in 2011 noted the two major demographic differences

between China and India most directly affect each country’s future prospects: trends in population growth and changes in population age distribution.

India’s population is currently smaller than China’s, but its current rate of population growth (1.55 percent annually) is more than double China’s (0.66 percent).

In 2025, India’s total population is projected to equal China’s (about 1.4 billion in each country) and to surpass China’s thereafter, making India the world’s most populous nation. India’s population is expected to continue increasing through at least to 2050.

India’s young population gives it a significant long term advantage over its rival China with its ageing population.With almost half India’s population under 24 years of age this generation is better educated, more ambitious and more acquisitive than older generations(c). By 2030, India’s population is expected to reach 1.5 billion, an increase of 23% from 2012(t).When a significant share of a country’s population reaches working age, that country can reap what is known as a “demographic dividend” — that is, to realise income growth and savings because a higher proportion of its population is able to contribute to the economy.

21.1 million21.1 Million – number of motorcycles expected to be sold in India in 2016(u).

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India has a young demographic and a middle class with rising disposable income. If the country can sustain its current pace of growth – and that is likely – average household incomes will triple over the next 20 years and India will become the fifth largest consumer economy in the world by 2025, McKinsey Global Institute (MGI)(o).

The Government of India has also played a major role in the growth of this segment. It has enacted policies that have attracted foreign direct investment (FDI) and as a result boosted economic growth(o).

Global corporations view India as a vital market for the future.

The middle class

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ConclusionIndia has long boasted big statistics. History-making government changes add to the equation. The seeds for India’s current economic transformation may have been planted in 1991, but the pro-reform Modi government’s comprehensive election win delivered a major boost since 2014.

Modi’s mandate for reform has been a catalyst for attracting considerable foreign investment. Australian investors, have been slow to catch on, and remain significantly under-invested in the subcontinent. This is bound to change, as India has taken the mantel of the world’s fastest growing economy from China, according to both the International Monetary Fund and the World Bank.

As India approaches its 75th anniversary of independence it is set to become a fastest growing economy with a difference: not only has India recently conducted the world’s largest democratic elections. The World Bank also states:

‘India’s progress in economic and human development is one of the most significant global achievements of recent times. Between 2005 and 2010, India’s

share of global GDP increased from 1.8 to 2.7 percent, and 53 million people were lifted out of poverty.

India is home to globally recognised companies in pharmaceuticals, steel, and space technologies, and the country is a leader in the use of information technologies for e-government and public service delivery.

In line with these transformations, India is now among the top 10 percentile of fast growing nations and has become a prominent global voice.

Progress on human development has been remarkable: life expectancy more than doubled from 31 years in 1947 to 65 years in 2012, and adult literacy more than quadrupled from 18 percent in 1951 to 74 percent in 2011(y).’

Increased transparency in the political

‘As India approaches its 75th anniversary of independence it is set to become a fastest growing economy with a difference...’

and regulatory environments, combined with the demographic dividend of this youthful nation, suggest a strong and powerful nation and economy for decades to come.

A stunning display of modern architecture at its best– the Lotus Temple, located

in New Delhi, India has won numerous architectural awards.

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c. CIA World Factbookd. The Economist (May 2014)e. The GSMA India Mobile Economy 2013

– Boston Consulting Group http://www.gsmamobileeconomyindia.com/GSMA_Mobile_Economy_India_Report_2013. pdf

f. DFAT – Australian Government India Fact Sheet December 2014

g. Ernst & Young Indian Budget update 2015 EY presentation (2). pdf (p5)

h. World Bank Regional Outlook South Asia Report GEP 2 (p9)

i. Lowy Institute the Interpreter http://www.lowyinterpreter.org/post/2014/05/19/ Manmohan-Singh-legacy-Foreign-policy.aspx

j. The Economist (Jan 2015)k. International Monetary Fund April 2016.

World Economic Outlook: Legacies, Clouds, Uncertainties. Washington(October). http://www.imf.org/external/pubs/ft/weo/2014/02/pdf/text.pdf (p8-9)

l. World Bank. 2014. India – Country snapshot. Washington, DC ; World Bank Group. http://documents.worldbank.org/curated/en/2014/10/20305633/india-country-snapshot

m. Ministry of Commerce & Industry, Department of Industry Policy & Promotion Fact Sheet on

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