Why this could be India's decade globally. Ridham Desai outlines factors

New Delhi: India has done a lot of heavy lifting over the last few years, especially over the last 4-5 years, feels Ridham Desai, head of India-Equity Research and India Equity Strategist at Morgan Stanley. Calling it a quintessential self-help story, Desai told CNBC-TV18 in an exclusive chat that India is helping itself probably dominate the world. He said the country is coming out of Covid-19, and according to him, the labour that was put in, in terms of policy and other things, is now bearing fruit. GDP growth: Desai believes that over the next 10 years, India could account for 20 percent of the growth that the world will generate. “Currently, the households in India that earn over $35,000 a year is about 5 million. Based on our forecast, this number will likely reach 25 million by early 2030. So, that’s a fivefold increase in the number of people that who can buy Louis Vuitton purses.” Covid-19 edge: The office of the world as a theme has emerged post-Covid-19. “It’s the silver lining to what was a pretty big human disaster — CEOs suddenly learned that working from home is okay. If you are working from home, you might as well work from Mumbai, it’s cheaper than working from Florida, and that is why jobs are being shipped into India,” Desai said. Offshoring: So, India is becoming the office and, incrementally, the factory to the world and offshoring is a big positive trigger for India, said Desai. “We are benefiting from what Morgan Stanley views as the multipolar world thesis. We are moving away from a bipolar world, which is dominated by the US and China.” Exports: As of now, India exports 20 percent of its GDP.  “We think India’s share in global exports will double in the next decade. So, we will be able to withstand some slowdown in global growth.” However, Desai added that in case there is a deep and broad recession, there will be pain. Healthy capex cycle: “I am sensing that companies in India are getting more optimistic, they are starting to run into some capacity constraints and therefore, there should be a pretty good capex cycle in the next two or three years. And that will be great for earnings. So. that’s something that we will watch out for as well.” Discretionary consumption: Desai said discretionary consumption would rise in 10 years, and many sub-sectors will surprise meaningfully. “Travel, education, home effects — these are all likely to see major increases in spends. Even sales of residential homes because we have been in a 10-year bear market, as far as home purchases are concerned,” he said. Indiastack as a public utility: When Nandan Nilekani framed this 10-12 years ago, nobody thought it would be as potent as it is now appearing to be, Desai said. “It has revolutionised how India invests, makes payments, or stores documents. It is now going to change the way India spends and lends. Nobody else in the world has got this system,” he said. Energy change: Desai said India’s commitment to net zero has led to major renewable plans set up for the next 10 years. “I think the Prime Minister has mentioned this many times… 500 gigawatts: we may or may not get to that exact number, but that’s going to completely alter our energy supply chains.” The US is struggling: He said the US was still struggling with inflation and with earnings. “That’s very unlike India. India is not struggling with these things.” Policies bearing fruits: Desai said effective social distribution using technology has been a key factor for the political success of the BJP. He also said that though Covid-19 interrupted India, a lot of the labour put in, in terms of policy and other things, is now bearing fruit. Despite the optimism, Desai highlighted that there were a lot of uncertainties in the world. “We have an election cycle coming up in a year and a half. It will be important for the Indian electorate to put in another majority government…. hopefully we don’t get a negative surprise in the 2024 elections,” he said. And what are the themes and sectors to bet on over the decade? According to Desai, go for…

1. 1. Banks and financials
   2. Consumer discretionary
   3. IT services
   4. Industrials, including defence

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