The Mumbai-based HDFC's net profit recorded a 30 per cent rise for the quarter that ended on June 30, compared to the same period last year, as bad loans remained under control and its net interest income climbed. The results came days after HDFC Bank combined with housing finance giant HDFC Limited to create a financial services behemoth with a market cap of about $150 billion.
Analysts said the combined group was likely to be a major winner as India sustains its expansion.
The IMF has predicted that Indian economy will grow 5.9 per cent this year, outshining China and the US. Well-run private-sector Indian banks are outperforming as they take advantage of strong economic growth and higher interest rates. HDFC is now in the top 10 lenders by size globally.
According to Goldman Sachs, by 2075, India will surpass not just Japan and Germany but also the United States to become the second-largest economy in the world. Currently, India is the world’s fifth-largest economy, behind Germany, Japan, China and the US.
In addition to a growing population, India's advancements in innovation and technology, increased capital investment, and improved worker productivity are what are fueling the prediction, according to a recent analysis by the investment bank. “Over the next two decades, the dependency ratio of India will be one of the lowest among regional economies,” said Goldman Sachs Research’s India economist, Santanu Sengupta.
India is already the fastest-growing economy in the world, having clocked 5.5% average gross domestic product growth over the past decade. Now, three megatrends - global offshoring, digitalization and energy transition - are setting the scene for unprecedented economic growth in the country of more than 1 billion people.
“We believe India is set to surpass Japan and Germany to become the world’s third-largest economy by 2027 and will have the third-largest stock market by the end of this decade,” says Ridham Desai, Morgan Stanley’s Chief Equity Strategist for India. “Consequently, India is gaining power in the world order, and in our opinion these idiosyncratic changes imply a once-in-a-generation shift and an opportunity for investors and companies.”
All told, India’s GDP could more than double from $3.5 trillion today to surpass $7.5 trillion by 2031. Its share of global exports could also double over that period, while the Bombay Stock Exchange could deliver 11% annual growth, reaching a market capitalization of $10 trillion in the coming decade.
In a new Morgan Stanley Research Bluepaper, analysts working across sectors look at how this new era of economic development could bring about staggering changes: boosting India’s share of global manufacturing, expanding credit availability, creating new businesses, improving quality of life and spurring a boom in consumer spending.
“In a world that is currently starved of growth, the opportunity set in India must be on global investors’ radar,” says Chetan Ahya, Morgan Stanley’s Chief Asia Economist. “India 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.”
India is also poised to become the factory to the world, as corporate tax cuts, investment incentives and infrastructure spending help drive capital investments in manufacturing. “Multinationals are now buoyant about the prospects of investing in India, and the government is helping their cause by investing in infrastructure as well as supplying land for building factories,” says Upasana Chachra, Chief India Economist.
Anuj Chande OBE, Head of South Asia Business Group, Grant Thornton UK LLP, said: “India is now the fifth largest economy in the world and is predicted to become the third largest by 2030. It therefore presents a huge opportunity for growth for businesses in the UK. As the country is only set to continue to grow, it is an excellent time for both those with an existing presence, and those looking to India for the first time, to be exploring potential opportunities in this market. India offers a stable and certain economic environment for investors and businesses, with, not only a fast-growing economy, but also a large working age and consumer population.”