China has so far been this centuries economic miracle… For the better part of the first 10 years of this decade, China’s economy grew an average of 10% a year, thanks to its exploding middle class. And by 2022, more than 250 million urban households joined China’s middle class, up an incredible 100 million from 2012.
This growth created some of the world’s largest companies, a whole new generation of wealthy entrepreneurs and created the world’s largest consumer of just about everything you can think of.
But this growing middle class is not having the same economic impact as it did in its first 10 years and many believe China’s booming growth story has peaked.
Giving way for “The Next China” to rise up and forge ahead…
India!
According to Morgan Stanley, India’s on track to become the world’s third largest economy by 2027, surpassing Japan and Germany…
And could boast the third largest stock market by 2030.
What’s more, India continues to cement its position as a preferred emerging market choice for foreign investors…Attracting the third-highest foreign direct investment (FDI).
And the country, “…. will be one of only three economies in the world that can generate more than $400 billion annual economic output growth from 2023 onward, and this will rise to more than $500 billion after 2028”.
But why India?
Global events – such as Covid/lockdown, trade wars, etc – over the past four years revealed glaring issue with today’s global economy…
The overdependence on China’s supply chains. After all, China is the largest exporter, and the world relies heavily on their goods.
So, countries and companies have diversified from China to other countries, to mitigate any economic and geopolitical risk. That’s where India comes in…
Since the pandemic-led lockdown, India’s economy has boomed…
They’ve spent over $100 billion annually in infrastructure spending (capital expenditure). And the country’s added around $1.4 trillion to its GDP.
In addition, India surpassed China to become the world’s most populous country with a population. Importantly, India’s population has one of the best ratios between its working-age population and its number of children and elderly.
What attracts foreign investors to India is this vast labour pool to tap into and the low cost of labour.
Then, in 2020, India’s government introduced the National Infrastructure Pipeline (NIP).
The program aims to boost infrastructure and manufacturing developments creating jobs and boosting investor confidence.
Over $1.7 trillion has been set aside for thousands of projects in energy, road and water infrastructure, housing, healthcare, transportation and other areas.
All this investment will be a boon for India’s economy and local companies.
As Morgan Stanley says, “As India’s economy transforms, we think that it will be increasingly relevant for global investors in a similar way that China is today.”
And all these developments mean one thing…
Demand for commodities from India will boom!
Take copper for instance…
Over the past two years alone, India’s copper consumption has nearly doubled!
Meanwhile, oil consumption recently hit the highest levels since 1998.
The Australia and New Zealand Banking Group Limited (ANZ) predicts India could cover more than half of China’s demand shortfall.
The point is, there’s more to commodity demand than just China.
Together India and China are helping to drive up our JSE small cap miners. So you would do well to be invested in this segment in the coming months!
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