India’s middle class and wealthy consumers – the facts reveal why you should engage with India

Conservative figures put the Indian middle class at 228 million

How big is India’s middle and wealthy class? And where are they?

Although this information is essential to your India engagement strategy, until now the answers have really only been speculation.

Lack of data continues to be a challenge, and estimates can vary wildly.

So, INTO INDIA brings you some numbers robust enough for you to use in your planning.

While some estimates put the middle class at 500 million or more, using a much tighter definition of middle class, Hurun Research produced much smaller numbers than most. They defined middle class as households who have more than over A$4,682 per year to spend on housing, travel, cars, education and products. These numbers found 57 million Indian households in the combined class of middle class and wealthy. Now, assuming each household might be four people, that becomes 228 million people.

Things are changing so fast that researchers have added a new category – the “New Middle Class”. In 2021 this new group was 633,000 households – around 2.5 million individuals. Who is in this group? It is those households who have approximately A$37,500 per year to spend on housing, travel, cars, education and products – a very exciting market!

Most of my research – but not all of it – comes from the Hurun Report, a leading research, luxury publishing and events group established in London in 1998 with presence in India, China, France, UK, USA, Australia, Japan, Canada and Luxembourg. It is widely recognized world-over for its comprehensive evaluation of the wealthiest individuals across the globe.

There are 412,000 dollar-millionaire households/affluent households in India with a networth of at least US$1 million.

Hurun Rich Listers have a wealth of Rs 1,000 crore (142 million), the report says, and pegs the number of such cumulative households in India at 3,000.

At the other end of the spectrum is the ‘Indian middle class’ that has earnings of over Rs 2.5-lakh per annum (over A$4,682) and a net worth of less than Rs 7 crore (A$1.3 million). 56,400,000 families in India fall under this category – approximately 224 million individuals.

The McKinsey Global Institute, which defines India’s middle class as households with real annual disposable incomes between 200,000 and 1 million rupees (US$3,606 to $18,031), estimates the ranks of middle class will more than double by 2025 to 583 million—41 percent of the population.

Where are they?

The top 10 states home to 70.3 per cent of millionaire households in India are Maharashtra (capital is Mumbai) has the highest number of millionaires (56,000), followed by Uttar Pradesh (36,000), Tamil Nadu (35,000), Karnataka (33,000) and Gujarat (29,000). City-wise, Mumbai is home to most millionaires (16,933), followed by Delhi (16,000), Kolkata (10,000), Bengaluru (7,582) and Chennai (4,685).

Aslany, who published a study on the Indian middle class in 2019, found that contrary to most assumptions, a significant segment of the Indian middle class resides in rural areas. About 28.05% of India’s population was middle class, Aslany found, adding that 52.31% of the lower middle class, more than 32% of the comfortable middle class, and more than 23% of the upper-middle class was in rural India. Most of the lower middle class in rural India are involved in agriculture, he said.

These realistic numbers should excite you to engage with India – right now demand for everything has gone through the roof!

Indian Budget 2022 – 6 takeaways

Finance Minister Nirmala Sitharaman delivers the 2022 Indian Budget

Finance Minister, Nirmala Sitharaman has delivered the 2022 Indian Budget – here are my 6 takeaways:

India is the fastest-growing large economy

At 9.2% for 2021-2022, India’s GDP growth will be the fastest of all the large economies.

Launching a digital currency

Indian minister’s 2022 budget speech focused on various incentives to boost India’s digital economy, including the launch of a digital rupee within 2022. Minister Sitharaman noted that the central bank digital currency will “give a big boost to the digital economy and lead to a more efficient and cheaper currency management system.”

India is going green

Calling climate change one of the highest external risks facing the country and the green economy a sunrise economy, the finance minister presented multiple proposals and pathways to climate action across different sectors. These include raising climate finance and developing greener public transportation.

Emphasizing inclusive development

The pandemic financially hurt millions of Indian families and analysts have warned against the threat of growing inequality amidst the pandemic. Prime Minister Modi’s government has, since 2014, laid a strong focus on citizen empowerment. India 2022 budget aims to expand its support for Indians, particularly vulnerable groups such as girls, women, senior citizens and farmers. The budget expands social welfare support, while economically empowering marginalised groups through job creation.

Expanding education and mental health care

The pandemic has meant that many Indian school children have lost up to 2 years of valuable schooling. Major educational programs include expanded digital tools for schools in remote regions.

In a significant move, Minister Sitharaman announced the launch of a National Tele-Mental Health Programme, which, built around 23 core health centres, will provide citizens with access to quality mental health counselling and care services.

But Covid is the big concern this year

With a new growth in Covid numbers, there is growing concern that the pandemic could hit India big again this year and could impact the budget numbers.

Aussie fund manager returns 52% last year from investing in India

Mugunthan Siva is the Managing Director of India Avenue Investment Management

You have got to hand it to the team at India Avenue Investment Management, with offices in Sydney and Mumbai.

Last year their leading fund made 52% for their Australian investors – and they specialise in India.

And they are about to launch another.

This group is “the avenue” for investors into India.

Is it time to have India in your portfolio?

https://www.afr.com/technology/how-india-helped-this-fundie-return-52pc-last-year-20220126-p59rfo

India’s TCS and Infosys rising, while IBM pushed down the ladder

Like most Indian IT giants, TCS offices are “campuses” which provide entire work and social life opportunities

According to Brand Finance, the Indian IT consultancy firm Tata Consultancy Services (TCS) has become the world’s second most valuable brand in the information technology (IT) services sector, while Accenture remains the world’s most valuable and strongest IT services brand.

According to the brand valuation consultancy’s newest Global 500 IT Services Ranking study, Infosys has emerged as the fastest growing IT services brand, with a 52% increase in brand value since last year and an 80% increase since 2020 to US$ 12.8 billion, putting it in third place.

TCS and Infosys have moved IBM from second to fourth place. IBM’s brand value is now US$ 10.6 billion, down 34% from last year and 50% since 2020.

Apart from TCS and Infosys, four more Indian firms are listed among the top 25 IT services brands: Wipro (7th), HCL (8th), Tech Mahindra (15th), and L&T Infotech (22nd).

This is an extraordinary achievement for the Indian IT sector and more is to come…

Great next era for India-Australia, says Hall Chadwick

Peter Pryn is a regular visitor to India and assists market entry for both India and Australia

As we approach Indian Republic Day and Australia Day – both on 26 January – here is a great message from my good friend Peter Pryn, Director of Hall Chadwick. This firm has a long commitment to building India-Australia business relations.

Change brings opportunity

This year, we see there to be great opportunities for international enterprises entering the Australian market. While there are niggling concerns about the Omicron variant, the post-COVID landscape is certainly one of rapid technological change, a transformational shakeup of global trading norms has occurred and there is an increasing focus on sustainable business. There is no doubt the way Australian business manage supply chains and source skilled staff has changed over the last two years. We see our clients, irrespective of scale, continue to look at ways to minimize supply chain interruptions to achieve an acceptable level of profitability.

Looking ahead: India – Australia relations

The Australian economy is very strong and the trend of high levels of foreign investment is forecast to continue. Along with a further easing of border restrictions in 2022, we are likely see a more aggressive migration program to catch up on lost population growth. This could be announced in the Federal Budget in May. We hope to see an expansive trade partnership (CECA) between India and Australia come to fruition before year-end. In a joint statement from Ministers Mr. Piyush Goyal and Mr. Dan Tehan last December, officials have been directed to speed up the negotiations.

These are all signs of a great next era in India – Australia business relations. We encourage you to start a conversation with us about opportunities to collaborate on business initiatives in 2022. 

We wish you all the best for your Republic Day and the year ahead.

Peter Pryn

Director

+61 3 9820 6400
  ppryn@hallchadwickmelb.com.au

India’s NSE world’s largest derivatives exchange

The National Stock Exchange in India’s finance capital, Mumbai

According to the Futures Industry Association (FIA), the National Stock Exchange of India has surpassed the New York Stock Exchange as the world’s largest derivatives exchange for the third year in a row in terms of the number of contracts traded in 2021. In addition, according to the World Federation of Exchanges (WFE) figures for 2021, the exchange placed fourth in terms of cash equities trading.

In the year 2021, the total number of registered investors on the NSE surpassed the 50 million milestone, reaching 55 million. The daily average turnover of equity futures has surged by 4.2 times in the recent decade, from US$ 4.47 billion in 2011 to US$ 18.98 billion in 2021. The daily average turnover of the cash market increased by 6.2 times within the same period, from US$ 1.50 billion in 2011 to US$ 9.3 billion in 2021.

The daily average turnover in currency derivatives surged by 83% from US$ 1.91 billion in 2011 to US$ 3.49 billion in 2021.

According to the exchange, academic research has demonstrated that a well-functioning derivatives market can provide a number of advantages, including greater liquidity and improved price discovery for the underlying assets.

The NSE recently announced that derivatives on the Nifty Midcap Select index will be available beginning January 24, 2022. With broad participation from all classes of investors in the current equity market rise, the midcap segment has come into focus, resulting in greater liquidity in these companies.

5 essential tips for doing business with India in 2022

Generation change is seen in shopping malls across India

Growing at around 9 per cent this year, India is well on track to be number 3 or 4 economy in the world. It is also one of the youngest countries on earth – with around 50% of the population aged under 25. Demand outstrips supply – for everything.

Here are some tips that might help your experience, but keep in mind you will find many variations and contradictions of these points in the very diverse and exciting India market:

India is many countries in one

Differences are not just seen in the North, South, East and West, India is truly many countries in one and you need to be ready for cultural diversity. While Mumbai is the fast and flashy financial capital, it is also a tough place because everything is done on grand scale and at great speed. New Delhi is more formal, also more liveable, and is more than a political capital – it is a powerful business city. Chennai is one of my favourites, embracing that slower southern pace and the values that shine in southern businesses. Pune is sophisticated and a major player across many sectors. Bengaluru is technology but much more as well. Regions have varying strengths, so research is the key.

Market entry strategies should think longer term

India is looking for more than a quick sale – it looks to build relationships and create trust that can last a lifetime. India is what we call a “collective” culture – everything is done within the group and if you make it into the group, you will make it there. This means your first venture should probably not be to send the sales and business development team over there is search of deals. Rather, lead from the top to create relationships – deals will follow.

Find your local Indian team and culture

Companies that have tried to impose their Head office teams and cultures on India operations rarely succeed. A priority should be to identify Indians who can lead locally – with your support. Accepting that the corporate culture might not be an exact mirror of your HQ culture is also vital – with care and guidance over time, your Indian operations will reflect key elements of central culture but will bring added value too.

“Yes” can mean “maybe” or “no”

Indians are among the most courteous and generous hosts on the planet. On top of this, their culture demands that they never provide an outright rejection or “no” statement, even when this is clearly the only answer. The dumbest question for a business to ask in India is “can you help me with market entry for my products?” The answer will always be “yes” and you will sit idle for a long time back home until you realise this is not the right question. Within Indian culture built so solidly on relationship above all else, the word “no” is a real relationship breaker and is rarely or never used. “Yes” can in fact mean “maybe” or even “no” and you need to look for the signs. Like most of Asia, Indians are indirect communicators. If that is not complex enough, consider that India has 26 major languages.

Learn the art of flexibility and patience

Being patient and flexible is an asset, even if you come from a country that likes to be blunt, direct and structured. Most Indian communication is indirect, so it can take some time to work out what the real issues are. India is full of surprises and you cope best through being flexible. Dropping any “one rule for all” approach is a good start.

Indian consumers going online

More good news! Consider Bangladesh – which for many symbolises everything wrong with the world – take another look

Literacy in Bangladesh jumped from 35% to 74%

Bangladesh, home to 160 million people, for many people in the west is a symbol of everything wrong with the unequal world.

But take another look.

It celebrated a ‘development miracle’ in 2021, its 50th year of independence. In the last three decades, GDP per capita has increased seven fold, 24 million people have been lifted out of poverty, life expectancy has risen to 73 years, infant and maternal mortality rates have fallen by a factor of five, the literacy rate has increased from 35% to 74%, and more than 97% of the population now has access to electricity, up from 62% in 2014.

Worth going over that again – it is genuine good news.

India economy has weathered the pandemic and set for growth – ASK Capital Management report

ASK Capital Management is a Singapore based entity with a focus on managing and advising India centric investments for institutional and family office clients. Their latest report shows how the Indian economy has weathered the pandemic and is set for growth:

This report relates to ASK India Opportunities Fund – Fund 1

The rapid rise in COVID cases due to the new Omicron variant, hawkish tone by major Central Banks around the world and persistent inflation contributed to a volatile December for the global equity markets. Despite this the markets ended on a positive note with most markets registering positive returns in the month. India was amongst the better performing markets with benchmark BSE500 ending up 3.2% in USD terms while the Fund was up 2.7%, net of fees in December. For the year 2021, the Fund returned 29.7%, net of fees compared to 27.6% for BSE500.

After another year spent in the shadow of the COVID, we begin 2022 with a new variant of the virus disrupting resumption of normal life. This, along with inflationary pressures and a move away from high liquidity and accommodative stance of Central Banks are the biggest risks to global economy for the year. While the new variant of the virus appears less fatal, the disruption means global supply chain issues will take longer to resolve. Tighter liquidity and end of cheap money means investors will have to temper expectations of returns in the new year and bottom-up stock picking will become crucial differentiator.

The Indian economy has weathered the pandemic induced slowdown well due to the proactive and effective steps taken by the RBI and the Government. The economy is above pre-COIVD levels in size and expected to grow around 9% in FY22 and 7.5%-7.9% in FY2023 by various estimates, one of the highest growing major economies in the world. As described in the past, lower debt on corporate balance sheets, controlled NPAs in banking sector and Government policies such as “Make In India” and Production Linked Incentives (PLIs) for various sectors should revive a domestic capex cycle.

While the recovery in India has been strong, it has also been uneven with the rural segment affected more from the Delta variant in Q1FY22. This should normalise over the course of the year and aid in demand recovery. Similarly, hiring activity continues to remain strong which should support demand.

As commodity prices and inflation stabilise, companies should report increase in margins over the coming quarters as prices increases are passed on to consumers. Thus, companies with higher pricing power and better cost controls should be able to deliver superior earnings growth with likely increase in market share. This has historically been the case for our portfolio companies, and we see no reason that this cannot be the case again. Our expectation is for the portfolio to deliver an average earnings CAGR of 26% over the next 3 years.

During the month we exited from Pidilite Industries and added Avenue SuperMart to the portfolio. We believe Avenue SuperMart is a well-oiled business model in a large opportunity landscape with a strong focus on low procurement and operating costs. Its store ownership model, right store size and low supply chain cost with auto replenishments help it to maintain low operating cost to achieve the key pillar of its success – everyday low cost and everyday low price. In a predominantly food and grocery business (52% revenue contribution) with wafer-thin margins (15% gross margin), the company is able to offer everyday low pricing, unlike peers that offer discounts on select days in a week or month, creating a competitive edge.

Contact:

Nikhil Iyer, CFA, Head of Institutional Business, APAC

ASK Capital Management Pte Ltd

m: +65 83800064 EMAIL nikhil.iyer@ask-capital.com

https://www.askfinancials.com/

Melbourne now medical research and pharma capital of Australia

Moderna to use Melbourne manufacturing base

Melbourne will become the first place outside of Europe and the United States to manufacture mRNA vaccines following a deal between the Victorian and federal governments and biotech giant Moderna.

Health Minister Greg Hunt said the facility would be key to the country’s medical manufacturing future and help meet the country’s COVID-19 vaccine needs.

Minister for Medical Research Jaala Pulford told ABC’s RN Breakfast Victoria’s heavy investment into medical research and pharmaceutical manufacturing over the past two decades had ultimately favoured Melbourne over Sydney for the bid.

Victoria’s medical research sector supports about 30,000 jobs and contributes an estimated $21 billion to the state’s economy, according to government figures.

“Melbourne is home to around 60 per cent of medical research that occurs in Australia and around 90 per cent of pharmaceutical manufacturing,” she said.

The facility will produce 25 million doses a year from 2024 and have the capacity to scale production up to 100 million doses per year to tackle future pandemics.

It will also produce other treatments for cancer, rare diseases, cellular engineering, and protein-replacement therapy.

https://www.theage.com.au/national/victoria/victoria-unveils-moderna-vaccine-deal-as-state-records-1189-covid-cases-20211214-p59ha1.html