Consumerism can be defined as increasing consumption of goods and services being economically desirable. The belief being that increasing levels of spending, rather than saving, leads to a greater level of GDP.
India has a significant opportunity in consumerism due to its demographic dividend and the emergence of its middle class as a consumer. In this note we illustrate the opportunity, which can be leveraged by companies operating in India.
Figure 1: Population by age
HOUSEHOLD SAVINGS RATE
Figure 2: Indian Household Savings
Source: tradingeconomics.comIndia’s household saving rate is over 30% of disposable income, which is representative of Asia’s cultural propensity to save in general. Contrast this to the savings rate of the US (4%), Japan (sub 1%), Europe (7%), UK (4%) and Australia (9%) and it is easy to understand the potential consumption spending power of a youthful and vibrant India, particularly given the focus on job creation by the Modi Government. If oil prices continue to remain low and inflation recedes, it provides the opportunity for lower interest rates, which stimulates spending and credit growth. This is likely to benefit several consumption oriented companies over the next 3-5 years in particular.
RISING MIDDLE CLASS
TECHNOLOGY AND SOCIAL MEDIA
INDIA AVENUE OPINION
- Consumerism is inevitable in India as trends towards urbanisation, increasing consumption and increasing employment take hold.
- Technology enhances the speed by which companies can penetrate households. This should be a strong driver of growth in India.
- It is our view that companies with the appropriate consumer preference awareness, price point and localised market knowledge are likely to benefit significantly from policy initiatives and reform such as GST.
- The potential for increasing earnings growth, given the tailwinds of spending power, youthful demographics and rising wealth through skilled employment, are mind boggling
- With consumption spending set to accelerate significantly, it is likely that a “virtuous circle” of efficiency, scale and profitability commences for companies catering for shifting consumer demands.
India Avenue is a boutique investment management firm providing investment solutions that allow our clients to benefit from India’s remarkable growth story.
The journey towards the “birth” of India Avenue originated in 2005, when ING Investment Management started a business in India as a separate division, utilising a practiced multi-manager philosophy in markets like Australia, and exported it to India. Three of our founders, Mugunthan Siva, Rajeev Thakkar and Sajjan Raut Desai worked together for INGIM (India), building investment strategies and structures, under this philosophy and applying them to Indian capital markets
In 2011 our founders started discussing the possibility of building an investment firm with a capability to provide a focus on India as an stand-alone investment jurisdiction for foreign investors. The founders identified Australia and New Zealand as nascent markets for investing in regional locations, with the potential to accelerate given education and insights which the firm could provide.
By 2015 the group of founders decided to work full-time on this concept to bring it to life. They did this by leaving their existing employment, thus exercising high conviction in the investment region of India as a long-term structural story for investors in Australia and New Zealand. Thus, the firm India Avenue Investment Management was registered and came to life in 2015 in Sydney, Australia.
After building our business for a period of 12 months, our first fund, The India Avenue Equity Fund was launched on 6th September 2016, with strong service provider partners like Equity Trustees (RE), Mainstream (Fund Administrator), KPMG (Fund Auditor) and BNP India (Custodian).
India Avenue is now a boutique investment business firm, with clients spread across family offices, high net worth individuals, wealth advisers and financial planning firms. Our firm has focused on education and knowledge as a driver of investment behaviour and have taken a long-term approach towards Australian and New Zealand investors contemplating an allocation to India’s growth as part of their portfolios. Our firm has assets in excess of A$50m and the India Avenue Equity Fund is rated “Recommended”* by Lonsec and is available on multiple investment platforms across Australia and New Zealand.