Author: niveshaay@gmail.com

“Water is life’s matter and matrix, mother and medium. There is no life without water.”

India is home to a whopping 18% of the world’s population, but it only has about 4% of the world’s resources. With cities growing and industries booming, the country’s water demand is set to skyrocket from around 1040 BCM (billion cubic meters) now to about 1447 BCM by 2050. This surge in demand is made worse by problems like groundwater depletion, climate change, and poor water reuse and recycling practices. To make sure everyone has access to clean and safe water, it’s vital to invest in water and wastewater infrastructure. This will help us make the most of our water resources and tackle the looming supply challenges.

Basic understanding of the value chain

Here’s a quick rundown of how the water/wastewater treatment industry operates:

Consultants – The Planners: First up are the consultancy firms. These companies kick things off by analyzing the area where a Sewage Treatment Plant (STP) or Water Treatment Plant (WTP) will be built. They look at the local population, how much sewage is generated, and other key factors to figure out the plant’s required capacity and other necessary things. They then draft up layouts that show the plant’s capacity, location, treatment technology, and a survey of the pipeline network.

EPC Companies – The Builders: Next in line are the Engineering, Procurement, and Construction (EPC) companies. They take the consultants’ plans and start building the WTP or STP, along with the necessary pipelines. They handle everything from getting materials to actual construction. Some EPC companies stick to engineering and procurement and hire others for the construction part. On bigger projects, even those that do handle construction might subcontract parts of the job. These companies usually also manage the operation and maintenance of the plants once they’re up and running.

Component/Equipment Manufacturers – The Suppliers Then there are the component manufacturers. These companies supply crucial parts like membranes, bar screens, sludge digesters, pumps, and various filtration equipment. Some of these manufacturers also dabble in EPC activities, adding another layer to their business.

The Indian Water and Wastewater Industry Market size

Source: Frost and Suillvan, Niveshaay Research.

Do note, for the estimation of the market size of the industry we have only considered the EPC of the plants and the equipment. EPC for Pumping system and pipe laying works haven’t been included in this, which itself is a big opportunity under water.

Why water and wastewater Industry India

1. Repercussions of not treating wastewater are high

Ever wondered what would happen if we just let wastewater be? Spoiler alert: it’s disastrous. Here’s a quick look at the major fallout of not treating our wastewater:

Water scarcity – Right now, about 7% of India’s population don’t have access to safe drinking water. On top of that, around 57% lack proper household sanitation. The water we do have is also getting scarcer. In 2021, the average annual water availability per person was 1486 cubic meters. By 2031, it’s expected to drop to 1367 cubic meters. FYI, if this number falls below 1700 cubic meters, we’re officially in “water-stressed” territory, and below 1000 cubic meters, we hit “water scarcity.”

Economic impact – Dirty water isn’t just gross; it’s expensive. Water pollution and related diseases put a huge strain on the economy. With 70% of India’s surface water contaminated and many people lacking safe drinking water, water-borne diseases are common and cost around USD 600 million annually.

Regulatory requirements – As per regulations, industrial units are required to install effluent treatment plants (ETPs) and treat their effluents to comply with stipulated environmental standards before discharging into rivers and other water bodies. However, many industries still do not treat their water before discharging it. In response, the government has begun taking strict action against those who release untreated water.

So, it’s clear: not treating and reusing wastewater has serious consequences. Whether you look at it from an environmental, economic, social, or regulatory angle, treating wastewater is crucial.

2. Massive gap in treat capacity and related infrastructure.

The Central Pollution Control Board (CPCB) reported that in 2020-21, rural areas in India generated about 39,600 MLD (million liters of wastewater per day), while urban areas produced a whopping 72,368 MLD. With the population growing and more people moving to cities, this amount of waste is expected to nearly double by 2050.

In 2020-21, urban areas in India generated 72,368 MLD of wastewater, but the operational treatment capacity was only 26,869 MLD, leaving a massive 63% undercapacity. Shockingly, just 28% of the total wastewater was treated, with the remaining 72% released untreated into water bodies. Even worse, only 12,200 MLD of the treated wastewater met the standards set by the Pollution Control Boards (PCBs/PCCs).

To keep up with the estimated future wastewater generation of 130,639 MLD, India needs to add 3,132 MLD of treatment capacity every year.

Wastewater treatment in India is just getting started but reusing (at a very nascent stage) that water is crucial for optimizing our resources. To give you an idea, in 2020-21, India produced about 72,368 million liters of wastewater daily. If all that water was treated and reused for irrigation, it could have covered around 3.2 million hectares of farmland. That’s about 22 times the size of Delhi! Just imagine the possibilities.

Also, besides sewage treatment plants, only about 30-35% of tier 1 cities have a good sewage network. It’s even worse in tier 2 and tier 3 cities. On top of that, around 13-14% of the households targeted by the Jal Jeevan Mission (JJM) still don’t have a tap water connection.

So, it’s pretty clear that India still has a long way to go when it comes to having proper water infrastructure. This is super important for conserving water and reusing it effectively.

3. Government driving the investments.

It’s the various government policies that are driving investments in water and wastewater. The Indian government has been emphasizing the importance of water and has rolled out several schemes for water conservation, treatment, and availability.

Here are six major schemes focused on water supply and wastewater treatment, have you heard of any of these schemes?

According to our estimate and understanding, if the government were to complete what they have envisaged under the above 4 schemes (excluding Atal bhujal yogna & Pradhan Mantri Krishi Sinchai Yogjana) we are expecting an investment of almost Rs. 50,000 – Rs. 60,000 Crores in the next 2-3 years. This project includes work related to sewerage network, water supply networks, Sewage treatment plant and water treatment plants.

4. Stricter CPBC Rules Fuel Growth

Industrial growth and tougher regulations from the CPCB and NGT (National Green Tribunal) are ramping up the need for industrial effluent treatment plants. According to the Environment (Protection) Act, 1986, and the Water (Prevention & Control of Pollution) Act, 1974, industries and local bodies must set up ETPs, CETPs, and STPs to treat their waste before releasing it. The CPCB, SPCBs, and PCCs keep an eye on this and dish out penalties for non-compliance.

Since the NGT’s 2018 order, things have improved. Out of 2,859 heavily polluting industries, 2,197 are up and running, with 2,059 meeting the standards, while 138 are still lagging. Those that don’t comply face show-cause notices and even shutdown orders. So, with stricter rules and booming industrialization, the demand for wastewater treatment plants is definitely on the rise.

Companies engaged across the value chain are given below: –

Conclusion: –

So, it’s quite evident that India still has a long way to go in terms of developing proper water infrastructure. This is crucial not just for conserving water, but also for reusing it efficiently. Without the right infrastructure in place, we miss out on huge opportunities to optimize our water resources. Investing in better wastewater treatment and reuse systems can make a massive difference, ensuring we use our water wisely and sustainably for the future.

After all, taking care of our water resources is ultimately for our own benefit. By conserving and reusing water effectively, we secure a better future for ourselves and the generations to come. It’s time to step up and prioritize the health of our water systems.

In the coming decades, global energy demand is expected to significantly increase due to rising population, industrial growth, technological advancements, and increased data center usage. This growing demand, coupled with challenges such as climate change, greenhouse gas emissions, and escalating pollution, underscores the need for renewable energy solutions. Among these solutions, Solar energy has been adopted in a meaningful way leveraging its scalability, decreasing costs, and long-term sustainability.  

As the power sector undergoes this rapid transition towards cleaner and greener sources of energy, it has presented investors with interesting investment opportunities. We, at Niveshaay, are particularly bullish on this trend. As part of our scuttlebutt investing approach and to gain firsthand insights into the global solar industry, we recently attended the ‘SNEC 17^th (2024) International PV Power Expo’ in Shanghai, China.

Current Industry Trend

Our visit to the SNEC Expo provided invaluable insights into the industry’s current landscape and emerging trends. One of the important observations was the industry-wide adoption of TOPCon technology in China. This technology boasts superior efficiency compared to the previously dominant PERC technology, and Chinese manufacturers are leading the charge with a whopping 700 GW TOPCon cell capacity. Due to cost advantages and better pricing of TOPCon cells as compared to PERC cells, most of the companies in China are strategically shifting to TOPCon and phasing out their PERC facilities. Though HJT has better efficiency than TOPCon, it is a costlier technology and the manufacturers are facing some issues in manufacturing HJT cells. China currently has 100 GW HJT cell capacity.

Dominant Position of China

The key factor behind China’s dominant position in the solar industry is the robust government support. This enables them to establish massive production capacities (ranging from 10 to 20 GW) within a remarkably short timeframe of 12-18 months. This rapid scaling is fuelled by a confluence of government incentives, including free land for five years, attractive local subsidies, tax exemptions for initial years, and access to critical utilities like power and water at subsidised rates. Additionally, their fully automated production lines enable them to scale and run efficient operations through adequate human oversight.

India’s Rise: Matching Ambition with Action

Despite dominance of China in the global solar industry, the Indian government has been very proactive in building the necessary infrastructure for a swift energy transition. Initiatives like ALMM (Approved List of Models and Manufacturers) and DCR (Domestic Content Requirement) have significantly benefitted Indian solar manufacturers, empowering them to cater more effectively to domestic demand and restrict competition from Chinese players. The implementation of ALMM has also led to a decline in module imports from China. A growing trend within the Indian solar sector is the intention to push for backward integration, a strategy that allows manufacturers to exert greater control over their supply chains. This move is expected to be further bolstered by the government’s PLI (Production Linked Incentive) scheme.

A Golden Opportunity for Indian Solar Players

MonoPERC technology is expected to stay relevant for Indian markets for implementation under DCR and ALMM requirements. TOPCon is still in its initial phases and may take time to ramp up as only few large players in India are making TOPCon modules in limited quantity. Manufacturers who are able to transition to TOPCon technology in the near future would stand to gain a significant competitive edge. By embracing TOPCon early, they can capitalize on its efficiency benefits and establish themselves as strong contenders.

There are also circumventing and dumping allegations against few Southeast Asian countries in US markets which will create demand-supply gap. Other export markets are also expected to restrict entry of Chinese vendors due to significant overcapacity. Indian manufacturers stand to benefit due to this unique situation in the export markets.

Challenges and the Road Ahead: Building a Resilient Domestic Ecosystem

One of the key challenges on the path to self-sufficiency lies in establishing cell manufacturing facilities in India. Currently, Indian cell manufacturers are facing hurdles in securing essential utilities infrastructure and navigating restrictions on the entry of Chinese engineers to India. Companies that can commence facilities without much delay will have a significant advantage due to demand generated from DCR scheme. However, China’s current overcapacity has created a unique advantage for Indian companies. Chinese equipment manufacturers who are facing constrains in domestic (China) market, are now wooing Indian companies with attractive turnkey solutions at favourable terms.

Summary

The technology in solar is changing fast with limited time available for the manufacturer to recover their investments along with decent profitability while parallelly shifting to latest technology. Due to this complicated and capital-intensive nature of the industry, it may be difficult for a new player with limited history of execution to enter the business and be successful in long run. The energy storage business has also started gaining traction in China due to falling prices of the batteries. Once available at full scale and at a reasonable cost, it will experience significant growth in the Indian market.

The SNEC Expo served as a powerful testament to the dynamism of the global solar industry. The future of solar energy is undeniably bright, and India is well-positioned to be a major player in this transformative journey. By staying informed about the latest technological advancements, government policies, and market trends, investors can make strategic decisions and capitalize on the immense potential of this rapidly evolving sector.

Happy Investing!

The election outcome has been both remarkable and unexpected. The National Democratic Alliance (NDA) has returned for a third term forming a coalition government. There should not be any crucial impact on the policy frameworks as previous ministers have retained major ministries, ensuring the continuity of previously announced policies.

Historical Context: Government Capex and Economic Impact

Historically, the size and influence of government capex on the economy were substantial, particularly in the 1980s when public spending played a critical role in economic growth. At that time, continuity in government policies was crucial for sustaining economic momentum.

Typically, government capex drives initial growth, which is then followed by private investment. As government policies have already set the foundation, it’s time for private capex to take the lead, indicating a reduced dependency on government spending.

In India, the bull market persisted in 2004 despite a change in government and the formation of a coalition government, fuelled by the continuation of key economic policies and major private capex, resulting in a substantial market rally from 2004 to 2007.

The data mentioned below suggests that irrespective of government actions or changes, portfolio returns will ultimately reflect long-term earnings growth. Therefore, as investors, it’s crucial to concentrate on sectors where corporate earnings growth is expected to be robust.

Sustained Continued Growth Expected for Key Industries

The last two terms of the BJP-led government have seen a huge budgeted capital expenditure for Infrastructure, Railways, Defence, and many more, where we have already made investment allocations to capitalize on the anticipated growth opportunities.

In addition to the global momentum towards energy transition, investments in the whole value chain have paved the way for significant growth. Concurrently, India’s textile industry stands to benefit from the ‘China Plus One’ strategy and supply chain consolidation trends. The growth in this sector not only supports these strategies but also leads to significant employment generation in the country. Moreover, in electronics manufacturing, import substitution has strengthened Indian companies due to cost efficiencies, reduced lead times, and enhanced quality, fostering both domestic preference and increased export opportunities.

Moving forward, we also anticipate some measures towards populist measures aimed at rural development.

Rural Development: Addressing Economic Disparities

According to our observations, the current government’s approach focuses on long-term improvements in rural economies through infrastructure development, such as housing, electrification, and essential facilities, rather than short-term freebies. This strategy aims to provide sustainable economic upliftment.

Moreover, we believe that nurturing a thriving manufacturing sector will result in higher wages, particularly benefiting the bottom of the pyramid. This approach could potentially offer a sustainable solution for rural economic growth over the next decades. Emphasizing investments in manufacturing rather than short-term incentives ensures long-term growth supported by increased earnings and economic stability.

Strategy: Balancing Reactivity and Long-Term Focus

In the face of current market conditions, it is prudent to adopt a reactive rather than predictive investment strategy. Observing the formation of the new government and the distribution of ministries will provide critical insights into the future direction of economic policy. This wait-and-watch approach will allow investors to make informed decisions based on emerging data.

Furthermore, with minimal disruption in the distribution of ministries, we have been actively tracking and investing in the high-growth sectors supported by favorable policies. We anticipate continuity in policy allocation while remaining cautious about any announcements or shifts that could impact our portfolio or present future investment opportunities.

In conclusion, despite current anomalies, we remain focused on the bigger picture, confident that India’s long-term growth trajectory is secure and short term challenges will not have a lasting impact. The manufacturing sector is poised to be a long-term growth driver and energy transition initiatives are expected to remain a focus, aligning with global trends.

Disclaimer:

Niveshaay is a SEBI Registered (SEBI Registration No. INA000017541) Investment Advisory Firm. Our research expresses our opinions which are based on available public information, field research, inferences, and deductions through our due diligence and analytical process. To the best of our ability and belief, all information contained here is accurate and reliable and has been obtained from public sources, which we believe to be accurate and reliable. We make no representation, express or implied, as to the accuracy, timeliness, or completeness of any such information or with regard to the results obtained from its use. This report does not represent investment advice or a recommendation or a solicitation to buy any securities.

It’s that time of the year when we put our thoughts to perspective, reflect on our past successes and what didn’t work for us, evaluate areas for improvement, and convene with our team to set goals and agendas for the upcoming year. First and foremost, we’re pleased that we’ve concluded this eventful year on a positive note, with favorable returns attributed to our continued investment in previously identified opportunities over the past few years, as well as discovering new prospects within the sectors where we’ve already invested, and perhaps a bit of good luck as well. Our investments in high-growth sectors like Energy Transition, Capital Goods, and Manufacturing, particularly in the early stages, turned out to be advantageous this year.

The Indian equity markets sustained their upward trend, surpassing many global counterparts, largely due to favourable government policies reigniting investment activity. Our decision to invest a lump sum during the February-March-23 volatility proved beneficial, contributing to generating slightly higher returns throughout the year. Additionally, we’ve gleaned some important lessons this year. Firstly, the value of time spent in the market and prior thorough research in specific sectors greatly facilitates swift decision-making. Moreover, we’ve realized that valuation alone cannot serve as the sole criterion when considering investments in companies or businesses. The predictability of earnings growth, the competitive landscape, and the sustainability of business trends or tailwinds are equally critical factors that were also taken into account when we were making an investment decision.

At the outset, we launched our flagship smallcase, ‘Mid and Small Cap,’ which comprises a diversified portfolio that allocates across major sectors. Analysing, the tailwinds and expected accelerated adoption in the renewable sector, we launched the ‘Green Energy’ portfolio in 2021. The sector has garnered a lot of attention due to the government’s commitment to sustainability. It’s now when we realise, our portfolios were rightly placed in the journey to take advantage of the potential growth. Further, we believed that the supply chain re-arrangement post the pandemic coupled with government-led favorable policies aimed at reigniting the investment cycle in the country, promoting import substitution, and intensifying focus on exports, would contribute to the growth of Indian manufacturing.

This conviction prompted us to introduce the ‘China Plus One’ smallcase. When these initiatives started to translate in numbers, we believed that the higher investment in India’s manufacturing sector is expected to have a ripple effect by boosting consumption. Government policies have created significant growth opportunities, resulting in per capita GDP surpassing $2000. Historically, countries like China, Japan, and South Korea experienced a surge in consumption spending upon reaching this income level. In the last few years, a rise in consumption has been observed due to increasing disposable income and changing habits. We believe it’s the beginning of a new consumption story in India where premiumization will take a substantial share. With these thoughts in mind, we launched another portfolio, ‘Consumer Trends’ during Diwali, focused on discretionary consumption and premiumization. Lastly, our ‘Trends Trilogy’ smallcase is all about playing the three trends: Business, Financial and Technical Trends in a concentrated manner.

Commencing with the power sector, which is witnessing significant global investments, primarily due to the swift transition towards renewable energy sources. This surge in power generation prompts the growth of transmission and distribution companies. We integrated this theme into our portfolio by allocating investments in Transformers & Rectifiers (India), a prominent power transformer manufacturer and Skipper, the largest power transmission tower manufacturer in India. The ambitious target of achieving approximately 500 GW in renewable energy capacity by FY30, up from 179 GW in FY24, is anticipated to attract significant investments across the entire sector, encompassing generation, transmission, and distribution.

Supported by favourable policies and consistent government backing, India’s manufacturing and infrastructure real estate sector is witnessing a sectoral tailwind. We took exposure in this sector through Action Construction Equipment (ACE), dominating crane manufacturing with over 65% market share, and Sanghvi Movers, India’s largest crane rental company.

The ‘China Plus One’ strategy and the trend of supply re-arrangement present promising opportunities for India’s textile industry, a sentiment reaffirmed at the Bharat Tex expo. We maintain our optimism regarding this theme, and our early recognition of this sector and analysis of the value chain have enabled us to benefit either by investing in highly efficient garmenting companies or in growing home textile companies.

India has also undertaken similar government policies, such as supporting end-user industries through export tariffs and stimulating domestic demand via import substitution policies aimed at promoting indigenisation. For instance, these policies have strengthened India’s defence ecosystem, contributing to the nation’s self-reliance and economic growth. Defence exports increased from Rs. 10,746 crores in FY19 to Rs. 21,083 crores in FY24, and the target is to reach Rs. 35,000 crores by FY25. The import substitution in industries like the electronics manufacturing and food equipment industries has resulted in Indian companies being preferred over imported ones due to cost savings, reduced lead time, and good quality. According to Bloomberg, India’s electronics exports to the USA as a ratio of China’s increased from 2.51% in November 2021 to 7.65% in November 2023. In the UK, the share rose from 4.79% to 10% during the same period. From exporting zero mobile phones in 2014 to now becoming the 2nd largest exporter globally, electronic exports increased from $8.4 billion in FY19 to $23.6 billion in FY23.

Samsung and Foxconn, the manufacturer of Apple’s iPhone, are leading the charge in relocating their manufacturing operations to India. Supportive government policies incentivizing local production, combined with favourable production factors, are positioning India as an appealing destination for multinational corporations (MNCs) aiming to establish manufacturing facilities. Recently, Tesla has also signalled its intent to establish a manufacturing unit in India. This trend not only enhances the global competitiveness of MNCs but also encourages other companies to establish plants in India while fostering the growth of the component ecosystem and promoting increased domestic sourcing within the country.

As we observe manufacturing sector thriving, it naturally elevates the per capita income, consequently fuelling an increase in discretionary spending. This trend is expected to significantly boost consumer spending in India. Within the consumer discretionary space, the premiumization trend is gaining momentum. India can rely on its own domestic demand to firepower its growth, specifically, private consumption (accounts 60% of its GDP) and investment spending. Staying invested in the theme can yield good results in the long term.

As much as our thesis played out, certain companies, such as Hindware Home Innovation Ltd. even booked losses due to underperformance relative to our expectations. Initially, we viewed it as a promising undervalued brand play on real estate, but subsequently exited when the numbers didn’t comply with our investment thesis due to delayed or subdued consumption in the affordable segment. In China Plus One and Trends Trilogy Smallcase, we believed IFGL refractories to be a good ancillary play on the rapidly growing Steel industry but booked losses as the performance of the company was not on par with our expectations, largely attributed to ongoing geopolitical issues in Europe. These challenges impacted the company’s sales volume, which we expect to persist in the upcoming quarters.

We have received tremendous support throughout, and our Smallcase family has now grown to 25,000+ active subscribers. We hosted regular Webinars and conducted Ask Me Anything (AMA) sessions to share valuable insights and opportunities to stay informed about the ever-evolving financial landscape. To engage more personally with our subscribers, we organized meet-and-greet gatherings in Mumbai and Bangalore, allowing us to connect with our audience. We’re excited to continue hosting similar events and look forward to visiting more cities in the future! 

This year, we closed favourable deals in the private equity market, driven by our philosophy of having ‘skin in the game’ and investing in sectors exhibiting bullish trends. In the private sector, we look for opportunities where companies need growth capital and where IPOs are expected to come in the range of 6 months – 4 years. For instance, to name some:

We came across Waaree Energies Ltd. while exploring opportunities in the renewable sector. With a current capacity of 11 GW, it is India’s largest solar PV module manufacturing company. Considering it had only 2GW capacity in 2021, it has exponentially increased its capacity because of rising demand and a healthy order book. It has turned out to be an outperformer, with its valuation now more than triple since our investment in the second fund raise round. The company is now vertically integrating into cell manufacturing, which will further expand operating margins. A very good company to analyse the execution capabilities of any entrepreneur translating into tangible numerical results.

Similarly, we’ll continue to actively pursue investment opportunities in private markets, particularly in sectors such as manufacturing, power, renewables, and others.

While these sectors are experiencing huge tailwinds, and analysis of end-user industries’ capital expenditure plans reveals numerous promising opportunities across various sectors. But, the dilemma here these days is between the rich valuations and high expected earnings growth. Staying invested in the already identified stocks can turn out to be a good decision or invest in companies where earnings predictability is high and available at reasonable valuations.

We sincerely thank you for entrusting us with your wealth creation journey. Your confidence in us, particularly during volatile periods with a high churn in the portfolio is valued greatly. We remain committed to delivering exceptional service, as always.

Happy Investing!

Disclosure: https://niveshaay.com/disclosure

The first two decades of this century were China’s, then this decade and beyond will be India’s. The consumption story in India is just unfolding. – Sanjiv Mehta, Former CEO and MD, HUL

India, boasting a population of 1.4 billion, has recently surpassed China to become the world’s most populous country. Beyond economic indicators, India’s demographic profile, characterised by a sizable youth population and an expanding middle class, underscores the nation’s growing consumer potential.

Headlines announcing India’s remarkable GDP growth of 7.6% have captured widespread attention, showcasing the country’s growing manufacturing prowess. Increased investment in India’s manufacturing sector is anticipated to have a ripple down effect, spurring consumption.

The surge in retail lending activity provides tangible evidence of increasing consumer demand. India’s credit boom has fuelled a resurgence in sectors such as luxury real estate, automotive industries, and high-end consumer goods, reflecting a robust appetite for discretionary spending.

Economists forecast that when per capita GDP exceeds $2,000, a notable transformation occurs where countries observe a consistent trend of increased consumption, particularly discretionary spending. A similar trend was observed in the United States in the 1950s/60s, Japan in the 1970s, South Korea in the 1980s, and China in the 2000s.

Guess what? India has crossed the crucial inflexion point where per capita GDP has exceeded $2500. This is the stage where consumption skyrockets and moves from spending on needs to indulging in wants. Moreover, the trend towards premiumization spurs an increase in demand for luxury and high-end products. According to Bain & Co., the luxury market in India could burgeon to $200 billion by 2030, marking a threefold increase from its current size.

Forecasts from S&P Global Market Intelligence indicate that India’s GDP could soar to an impressive $7.3 trillion by 2030. Such growth prospects are underpinned by escalating manufacturing activity, which is expected to translate into heightened consumer spending and stimulate economic growth.

This demographic dividend, combined with rising aspirations for an elevated lifestyle, drives demand across various sectors. Some of the interesting sectors that can benefit from this trend are:

Wealth Management Industry:

Savings remain at the heart of every Indian. The rising per capita income will robustly drive India’s consumption story, but not at the cost of investments. Overall, the rising per capita income will simultaneously promote a culture of responsible investment. This dual momentum is harnessed by the wealth management sector to help individuals maximize the potential of their savings and navigate the complexities of wealth accumulation in an evolving economic landscape. With the rising number of demat accounts and high-net-worth-individuals (HNIs) in India, the wealth management industry is poised for inevitable growth. As individuals accumulate wealth, there is a growing need for professional management of their assets.

Luxury Segment:

One of the segments that can benefit from this ongoing premiumization trend is the luxury segment. Indians are embracing premium products and luxury fashion, creating significant growth opportunities for the luxury segment in India.

• Luxury watches

Luxury watches have always been a statement of elegance, status, and timeless style. The majority of luxury watches are Swiss watches. There has been a remarkable growth in the consumption of Swiss watches in India, reflecting an increasing preference for high-end watches among Indian consumers. The recently signed India-Europe free trade agreement will further boost the demand for Swiss watches as customs duties on imports will be removed over a period of 7 years.

Another segment benefiting from India’s economic growth is the luxury car segment, which has achieved its best-ever sales in the recently concluded financial year 2023-24. Carmakers attribute the increase in sales to a lifestyle shift post-Covid-19, with younger professionals opting for high-end cars. The booming market reflects an increasing appetite among Indian consumers for luxury and exclusivity. Also, considering the under penetration of luxury cars in India, where luxury car sales represent only 1% of total car sales, compared to higher percentages in countries like Japan (5%), Europe (18%), and China (17%), it’s evident that India’s luxury market holds immense potential for growth.

Hospitality sector

India’s hotel industry surged back to life, driven by a post-covid uptick in travel. Double-digit revenue growth was propelled by domestic leisure trips, meetings, incentives, conferences, and exhibition (MICE) events, the G20 Summit, and the return of business travellers. The added excitement of the ICC Cricket World Cup saw hotels fill up, and unorganized accommodations were abuzz.

Currently, India’s share in the total global MICE tourism (meetings, incentives, conferences, and exhibitions) is less than 1%, valued at USD 876.42 billion in 2022. This global market is projected to grow at a CAGR of 7.5% from 2023 to 2030. In India, it is expected to reach 2% within the next five years.

India is the fastest-growing aviation market in the world, with a projected growth in air trips of 7-8% between 2023 and 2030. To match the growing demand, Indian airlines have placed record orders for over 1,500 aircraft (discussed in the aviation blog).

All these indicators point to India emerging as a focal point for significant investment opportunities. The infusion of nearly $12.2 billion by foreign fund managers in the first half of 2023 alone underscores the growing interest in India’s economy. With private consumption contributing a substantial 60% to India’s GDP, it is clear that the nation’s consumer market is on track to become the world’s third-largest by 2027.

Moreover, India’s trajectory suggests that it will evolve into a $5 trillion consumption economy by 2031, with the middle class expected to drive 53% of incremental consumption. This underscores the enduring appeal of India’s consumption story, making it one of the most compelling long-term investment opportunities.