Demographics key to Indian opportunity
The demographic profile of the 1.2 billion people living in India is set to provide solid opportunities for the funds management industry in years to come, according to the country head of a major international asset manager.
“You have more than half the country’s population under 25 years of age. What that does is put the funds management industry and the rest of the economy in a very different place and plane relative to most of the developed markets,” said Fidelity Fund Management Private managing director and country head Ashu Suyash.
“Issues are not about old age security. It’s about accumulation, it’s about growth, and it’s about risk versus return. It also means that the bulk of the earning years are still to come,” she explained.
Traditionally, Indian households have kept more than half of their savings invested in property, cash, and gold because they had to be self sufficient, as there was no social security system in place.
But Suyash believes this conservative attitude towards investing has already exhibited signs of change, with the level of savings increasing from 8.9 to 10 per cent of the country’s gross domestic product over the past 10 years, and the allocation of these savings to mutual funds rising from 0.5 per cent to 4 per cent.
However, she feels this also shows the funds management market is still under penetrated and has tremendous growth opportunities ahead of it.
“Every 1 per cent that gets added adds $10 billion to the industry’s size without doing anything much,” Suyash said.
Furthermore, the rules regarding investing in overseas equities have been relaxed recently, making managed funds more attractive to individuals, and a proper framework governing these types of investments is being constructed.
“What stopped the market from taking off is that the securities regulator hasn’t come up with guidelines, so the Government hasn’t issued a framework, and in the absence of a framework you can’t sell,” Suyash explained.
“But over the next couple of years we see this happening, [and] that will add a very different angle and dimension to the market,” she concluded.
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