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10 Jan 2020 by Harsh Ashar
Is $5 Trillion Possible?

Over the years, I've learned there are only 2 phases to journey of attaining financial independence.

  • Dreaming of the life you want. Obviously, you need to have a portrait of the life you wish to live.
  • Second, making a plan by thinking outside the box to live the life you want. This can also mean that you need to continuously challenge your comfort zone and perspective to try new ideas and methods.

Lack of money is often one of biggest hindrances in achieving your long term goals. Read more here.

So as we embark on this New Year, with new goals, we wish to make the second part easier for you. Every year we make resolutions and say, "This is the year I'm finally going to follow my dream." And year after year, the portrait of these dreams doesn't seem to take the colors it should have.

The Golden Opportunity For Investor

The new market times are here, which provides an investor with fresh opportunities a unique chance to work on their dreams. But why we say - This is a golden time for investors like you.

You already know that GDP is set to double by 2025. This means from $2.9 trillion now; it is just a matter of approx. 5 years that India will become a $5 trillion economy. Now, that’s tremendous growth! However, many investors still have a question: Can India become a $5 trillion economy?

Why The Time For Growth Is Now?

Here’s why we think $5 trillion is doable:

  • Firstly, doubling our economy in next five years means India has to grow at a real growth rate of 7-8% YoY assuming 3-4% inflation YoY i.e. 10.5-11.5% of nominal growth. The number may look challenging to a few, but let me tell you - We have been growing at this pace for the last 5 years. This means we just have to continue the pace.
  • Along with this, rupee-dollar equation needs to stay stable at 71-72, which should not be a big challenge!
  • Government’s relentless initiatives in the right direction to drive financialization of savings i.e. shift from physical to financial assets

Considering the appropriate policy response and revolutionary reforms, India is more resilient to external shocks today. But there’s more to this!

The biggest growth driver would be increase in per capita income.

As per the various projections, per capita income is expected to increase from $2,000 now to $3,500 by 2024. An increase of over 75% in per capita income! This would mean a 4-5x discretionary spending power with each individual, including you and me! Crazy, isn’t it? But how it will help India achieve its target?

If you look, out of $2,172, $1,500 is spent on basic consumption needs, which leaves only $500 for discretionary spending. As you can see in the table below, when India touches ~$3,500 by 2024, this $1,500 will increase only marginally, leaving Indians with more surplus of ~3-3.5x for discretionary spending.

What does this mean to you? Considering the favorable demographics with high aspirations plus government’s focus on urbanization and Digital India, India will –Buy, buy & buy!

This will lead to an increase in the standard of living - People will buy more luxury goods, branded clothes and travel more. India’s consumption has high contribution in GDP, hence multiplier effect would be higher for India as compared to other emerging economies.

Why $2,000 Is An Important Number?

India’s current per capita income stands at $2,172. If you look at other economies, $2,000 number has been an inflection point for an economy to witness exponential growth of 2-4x in its consumption expenditure, i.e. amount spent on daily goods and services.

Let’s look at a few examples:

If you look at the above chart, we are exactly where China was in 2006. And then what happened? China grew from $2,111 in 2006 to $3,838 by 2009, an increase by almost by 82%. We are talking of achieving similar growth in 5 years, what China did in 3 years i.e. $2,172 per capita now to $3,500 by 2024.

Now, The Real Question – What About The Indian Stock Markets? Will They Also Grow?

India doubled its GDP from $1.37 tn in 2009 to $2.9 tn in 2019. But do you know that, while GDP doubled, Nifty grew by ~3.5 times during this period. If history can repeat, this means we will repeat similar humongous growth in just 5 years as India doubles its GDP by 2025. The multiplier effect will be seen in the stock markets as well, as Indian indices will grow as GDP grows! But as Indian indices shall grow, not all stocks will grow. So what you should do? Identify & Invest In Fundamentally Sound Stocks That Help You To Experience True Financial Independence!

We Wish To Help You!

As India grows, we're here to help you identify businesses…

Businesses backed by rigorous research

Businesses that have a high potential to grow with India’s growth story.

Businesses which are mispriced due to market volatility. Read more.

Businesses that are identified after understanding your goals, investment horizon, risk appetite, etc.

Businesses that you can track using our smart dashboard

By using this approach, we’ve helped more than 9,000 investors take the first step towards wealth creation. And talking about the performance, our model portfolio has delivered 400.53% returns over the last 5 years. Checkout our performance here. So, rather than procrastinating the journey that leads you towards your dream life or working really hard for it, its time to ponder upon how you can work smart by making your money work for you in 2020! Click here to know more.

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