Demand, demography, and democracy support opportunities in India

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Dec. 4 2020, Updated 10:53 a.m. ET

The three essential Ds that India offers

While addressing an audience at the Tokyo Stock Exchange in Japan during his five-day Japan visit, Indian Prime Minister Narendra Modi said that the era of “red tape” in India has been replaced by “red carpet,” with ease of doing business and liberalization. India now offers the three essential Ds for businesspeople to thrive, namely democracy, demography, and demand.

Democracy

India, the largest democracy, has promised single-window clearances and speedy decision-making to Japan under the aegis of the Modi government. Accordingly, Modi promised to introduce a special mechanism, the Japan Fast Track Channel for Japanese investors investing in India.

Modi also announced that Japan would nominate two people to the special management team under the Indian prime minister’s office, or PMO, to facilitate investment proposals from Japan.

Demography

While Japan faces an aging demographic profile along with China and other nations, the youth segment of India’s population is growing rapidly. More than half of India’s population is under the age of 25, with 65% of the population under 35.

By 2020, India’s average age is expected to be just 29 years—compared to 37 in China and the U.S., 45 in Western Europe, and 48 in Japan. This demographic trend will confer a significant competitive advantage on India.

Demand 

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One of the inherent strengths of the Indian economy is its private consumption expenditure. Plus, aggregate demand in India is expected to increase with rising disposable incomes, the demographic dividends of a younger generation, heightened aspirations, and increasing urbanization, resulting in a growing number of nuclear families.

Increasing consumption expenditure implies increasing purchasing power, which is turn indicates good economic health. This also reflects in the performance of exchange-traded funds (or ETFs) like the Wisdom Tree India Earnings Fund (EPI) and the Invesco PowerShares India ETF (PIN), which invest in India. These ETFs are quite representative of the economy at large. They invest across varied sectors and in blue-chip Indian companies like Infosys (INFY), HDFC Bank (HDB), and Tata Motors (TTM).

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