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February 2018 | GSAM Connect

EM Viewpoints – India: The World’s Growth Powerhouse

Our Emerging Markets Equity team returned with insights from the GSAM India tour, taking 21 clients to meet with India’s most senior leaders of corporations and the political establishment. Our excitement in the investment opportunity has been invigorated as we observed in detail three key drivers (listed below) that may leave India poised to potentially double in GDP to $6 trillion by 2027 to become the world’s third largest economy.

Strong domestically-driven growth profile

India today is where China was in 2000, with nearly identical share of the total global output and similar GDP per capita – and we believe the latter is expected to double by 2027 in India. The scale and youth of India’s demographic profile—with 65% of its 1.2 billion population under the age of 35—are without parallel, especially as the consumer stands at an inflection point with the bottom 50% of the population by income accounting for less than 10% of the country’s total consumption. India will need to create at least 15 million jobs per year to keep up with demographic trends. To put this number in context, the US added 2 million jobs last year in one of the strongest years for the labor market since the turn of the turn of the decade.

Reform-minded government

Prime Minister Narendra Modi’s government is working with the private sector to build the physical and digital infrastructure to better transport goods, information and India’s 1.2 billion people, while smoothing the friction points to allow for greater ease of living and of doing business. As we met with top ranking policymakers—from the Finance Minister to the US Ambassador—we were encouraged by the vision and execution of the administration as “good politics means good business,” a phrase reiterated by many private and public sector officials. India now stands to reap the gains of structural reforms from Good and Services Tax (GST) to demonetization (India’s government removed the 500 and 1000 rupee bank notes from legal currency in November 2016) that had previously taken a toll on growth as they forced the economy to modernize and formalize.

Profitable and diverse corporate universe

India’s market structure appears to be particularly compelling due to the number and diversity of publicly-listed companies that offer access to the rise of the consumer in India (especially in the middle class), while having a much smaller share of state-owned enterprises than for example China. We prefer small and midcaps, many which exist outside of the benchmark index, particularly in sectors where India is trying to solve domestic challenges like employing, educating, and caring for the 1 million new workers that come into the economy each month.


Economic growth

India’s per capita income is expected to grow 2x by 2027, from $1,868 currently to $4,135.



150 million Indians are coming into the workforce in the next 10 years and India already represents 18% of the global workforce.



India jumped 42 spots in the World Bank’s Ease of Doing Business Index since Modi’s election, but its rank at #100 leaves room for improvement. 



As GST helped formalize the economy, India saw a 50% increase in the # of enterprises registered for tax last year.



2 of 3 Indians live in rural areas where monthly per capita spending is $16/month vs. $29 for India at large (China is 4x greater).



Despite employing half
of India’s population,
the agriculture sector
only produces 17% of
India’s GDP. 

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Katherine Bordlemay

Katherine Bordlemay

Emerging Markets Specialist, Fundamental Equity Client Portfolio Management, Goldman Sachs Asset Management
Luke Barrs

Luke Barrs

Head of the Fundamental Equity Client Portfolio Management Team, EMEA, Goldman Sachs Asset Management


January 2018 | GSAM Connect
2018 EM Equity Outlook

In 2017, Emerging Market Equities have returned +37%, significantly outperforming US and Developed Market Equities, which returned +21% and +22% respectively – this marks the strongest absolute and relative performance in eight years. Looking to 2018, we believe Emerging Markets could be in the early stages of a multi-year recovery underpinned by 1) growth acceleration 2) earnings revival and 3) attractive valuations.