India: long-term views from a fixed income perspective

In Short

India is in many aspects a very interesting study these years, particularly as it moves up from a low-income country with high poverty rates. Economists and market analysts continue to produce a seemingly endless stream of research on the implications of India's economic development for stock market returns, while we analyze the factors supporting India's potential rise to high-income status and how such a transition could impact the global economy. We also explore potential market movements and returns from the perspective of a fixed income investor.
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By Alexander Friis Illum, Senior Analyst, Global Evolution

Ambitious goals supported by demographics Prime Minister Narendra Modi has made it a public goal that India achieves high-income status by 2047, marking the 100-year anniversary of its independence. In 2023, the threshold for a high-income country is a gross national income (GNI) per capita of USD

14,005; India's was USD 2,540, placing it in the lower middle-income group. To reach its 2047 goal, India must raise GNI per capita by 5.5x over the next 23 years, or grow GDP an average of 8% annually. While ambitious, India's young population and favorable demographics support this potential.

Chart 1: GNI/capita in different scenarios

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Clearly, 8% annual growth over a 24-year period is ambitious and may be overly so. However, a few factors speak in favor of India achieving extraordinary growth rates in the coming decades. Most notably, India’s demographics are very supportive of continued growth, contrary to most other major economies in the world. In Chart 2 we compare age-dependency ratios (the amount of people aged 0-14 and 65+ compared to the amount of people aged 15-64) for the 5 largest economies worldwide for the next 24 years as forecast by the UN.

Chart 2: Age-dependency ratio (2023-2047)

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India: long-term views from a fixed income perspective
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