Winter 2011
Issue Features
- European Sovereign Debt: Challenges and Opportunities
- Custom Target Retirement Date: The Optimal Solution?
- Securities Lending: Monitoring Borrower Demand Trends
- High-Yield Investment Balancing Act
Column: Voices
Departments
Department: Global Megatrends
Today, and over the foreseeable future, a series of events — call them global megatrends — will have a profound impact on the world economy. Each issue of Point of View will share insight into these trends and how the institutional investment community is preparing to address them.
India's Growing Influence
As Asia’s population and gross domestic product (GDP) gains increasingly influence global growth, emerging Asian economies will need to grow their domestic demand to sustain this momentum. Because developed countries continue to struggle economically, high demand for Asian exports will not return to their pre-crisis levels soon. While many Asian countries have yet to shake their reliance on external demand, India stands out as a country actively growing its domestic demand.
Asia's Dependence on Exports
According to the October 2010 International Monetary Fund (IMF) report “World Economic Outlook: Recovery, Risk and Rebalancing,” India’s recent growth (projected at 9.7% in 2010 and 8.4% in 2011) was driven largely by investment, and the contribution from net exports is projected to turn negative in 2011. Since 2005, India’s export rate has decreased year over year.
Financial Services and Private Domestic Consumption
According to “India 2020,” a report from Edelweiss, an investment banking and financial services company in India, three major themes will contribute to India’s continued growth: savings, consumption and infrastructure. These sectors are projected to grow faster than India’s GDP.
Savings Rates Show Potential
Household, corporate and public sector savings rates represent a powerful trend in India. According to the Edelweiss report, total gross domestic savings are projected to grow from Indian rupee (INR) 19 trillion to INR 72 trillion from 2009 to 2020. The key beneficiaries of this savings trend include the banking, capital markets and life insurance sectors, the Edelweiss report found.
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