Why 2018 Is The Best Year For Investment In India, Especially For The Common Man

May 15, 2018 | 6 months ago | Read Time: 4 minutes | By Manan Vyas

In the past month both the International Monetary Fund (IMF) and World Bank (WB) have released reports showing India’s positive growth trajectory for the year, further adding the phenomenal recovery of the country is pushing South Asia to be the fastest growing region in the world.

The IMF’s World Economic Outlook (WEO) stated that having recorded a Gross Domestic Product (GDP) of a whopping $2.6 trillion for the year 2017, India has now replaced France to be the world’s sixth largest economy.

The Indian economy, which was struggling to recover from the impacts of demonetisation and the roll out of the Goods and Services Tax (GST) has finally stabilised according to the World Bank, and is on track to grow at a rate of 7.3% in 2018, and 7.5% in 2019. “Both demonetisation and GST created short-term disruptions in economic activity,” the report stated. “As the inflation rate rebounded pushing real interest rates down, a recapitalization plan for banks was announced, and the effects of the two temporary shocks vanished, and growth bounced back.”

The World Bank also added that inflation rates in India are in line with targets and policy makers have been able to confront unexpected developments on the prices front. Furthermore, the global economy overall also recovered in 2017, however, as India was still recovering through the impositions and shocks of GST and demonetization, Indian investors were unable to take advantage of this global revival. However, it seems that this is all set to change for 2018, and with inflation targets in check and growth headed in a steady direction, one thing is clear, the market has set the stage for the common man to invest in the booming economy, and it is up to us to seize this opportunity. Governmental push for increased investment

 

The Economic Survey of the country published in January 2018, highlighted the government’s growing concern of the slowdown in investment in India. While the country reached historically high levels of investment in the mid-2000s, there was a slow and gradual decline in investment since 2012, particularly in private investment. Investment is critical to the growth of an economy, and the Survey highlighted the government’s attempts to increase investment in the country, including by increasing public investment, which creates ideal opportunities for people to undertake in private investment.

Additionally, in October last year, the government unveiled a plan to infuse over Rs 2.11 lakh crore capital for 2018-2020, highlighting their dedication to ensuring the global revival is also felt in the Indian economy. Economists and experts highlighted the critical nature of the plan, and said the recapitalisation of banks is the one thing that will revive private investment in the economy.

The infrastructure revival program coupled with the Insolvency and Bankruptcy Code (IBC) has had great payoffs for the economy, including pushing investors and foreign direct investment into the country, making it more ideal for first-time investors to dabble into the market. A report released in March this year, highlighted that the revival of growth in in the country for the quarter-ended in December was driven mostly due to a recovery in investments.

The growth in gross fixed capital formation for the quarter was 12%, a whopping increase from the 6.9% in the September quarter. In addition to this, a noteworthy factor is the country’s growing acceptance of digital India and the e-commerce sector as well as its strides towards financial inclusion.

New doors open for investment

Change in governmental policies and outlook has opened up a set of new industries for the economy, some of which have the capability to change the outset of the Indian economy, thereby, creating innumerable chances for the Indian investor. Let’s take the Indian e-commerce sector for an example- not a day goes by that we don’t hear about a global giant such as Amazon or Walmart competing to penetrate the Indian market, or hear numerous stories about the growth of home-grown players such as Flipkart. With the Indian e-commerce sector set to cross over $50 billion in 2018, the landscape of opportunities available to investors has increased considerably. Another industry that is benefitting from the government’s drive of financial inclusion is the cross-border remittance Indian market which is estimated to be cross $6-7 billion for the year, due to the Reserve Bank of India’s decision to allow non-traditional players such as Paytm, Airtel and many more to make their foray into foreign exchange and cross-border remittance services.

The growth of such new industries, coupled with strong government backing has also pushed up the stock market in India, making it more lucrative for investors. As highlighted by the World Bank, stock market prices in India are “strongly influenced by global trends” and has been “climbing for a while.” Market experts have predicted that all these rises, coupled with GDP growth are expected to push investments from 30% (of GDP) for 2017 to around 35% in 2027, marking an increase in gross capital formation from $0.7 trillion annually to around $2.4 trillion.

A major motivator for private investment for consumers is corporate profitability which according to BSE 500 company earnings growth has recovered majorly in 2017 and expected to be even higher for 2018, almost just screaming out for people to invest back into the economy.

All these macro and micro figures point to one thing: it is a good time for the common man to invest into the market. The booming growth figures, coupled with government backing and revival has set our stage, and it is up to us to take up the opportunity and invest.


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