Analysing India's SLOW GDP (& its impact) | Akshat Shrivastava

Summary

India's GDP paradox reveals economic growth amidst underlying weaknesses. With aspirations of becoming the fourth-largest GDP, serious concerns like slowing GDP growth, weakening INR, and high taxation looms. Despite significant domestic consumption supporting GDP, private consumption growth slows due to taxation impacting savings. Foreign direct investments witness a downturn while net investments shrink, indicating global hesitance. The tech industry shows competitive advantages, but India needs growth in high-tech sectors to attract foreign wealth and build sustainable growth. Investors must diversify portfolios amidst inflation threats, aiming for international stocks alongside Indian markets.

Highlights

• India is on path to become the fourth-largest GDP but faces underlying issues.🇮🇳
• Real GDP matters more than nominal GDP as it accounts for inflation.📊
• Domestic consumption drives GDP but private spending growth has slowed.🥛
• High taxation impacts savings, decreasing private consumption.🤑
• Foreign investments are low despite a weaker INR and growth prospects.💸

Key Takeaways

• India's GDP touches new highs but concerns linger with slowing growth rates 📉.
• Real GDP is the key focus; nominal GDP often inflates the outlook due to inflation.📊
• Private consumption, a key GDP driver, has slowed down due to high taxes.📉
• Foreign investments are dwindling, creating a need for competitive advantages.🌍
• Investing should include international stocks to hedge against domestic market risks.💼

Overview

India's economy is full of contradictions. On one hand, it's poised to become the world's fourth-largest economy, giving us reasons for pride. However, the ground reality hints at deeper concerns: a weakening currency, rising costs, and sluggish growth rates. India, a consumer-driven economy, relies heavily on domestic consumption which is now slowing due to heavy taxation.

Despite such challenges, there's a need to adopt data-driven investment decisions amidst these times of economic turmoil. Real GDP sheds more light on the country's true economic progress, as it removes the inflation factor, unlike nominal GDP which often paints a prettier picture. Now more than ever, India needs to tackle the slowing foreign investments and look towards building competitive advantages in sectors like IT and manufacturing.

Diversification becomes crucial for investors as they navigate through fluctuating markets and rising inflation. With limited domestic growth opportunities, international investing offers a safety net, while India still holds potential with its young demography and tech capability. Building wealth requires a multifaceted approach, especially in these times of economic realities.

Chapters

• 00:00 - 03:00: Introduction and India's GDP Status In the introduction of this chapter, the discussion centers around the current status of India's GDP. It highlights a paradox in India's economic scenario; on one hand, India is on track to become the world's fourth-largest economy by GDP, surpassing Japan, which is a source of national pride. On the other hand, there is a contrasting reality where around 80 crore people (800 million) are dependent on free ration. This disparity poses the question of what is truly happening in the Indian economy as it balances the image of a growing GDP with the socioeconomic challenges faced by a significant portion of its population.
• 03:00 - 06:00: Understanding Real vs Nominal GDP The chapter 'Understanding Real vs Nominal GDP' explores three primary questions about India's GDP. First, it considers whether India's GDP is fundamentally strong or weak, especially with concerns like a weakening INR and a fall in passport ranking. Second, it identifies potential areas for improvement if the GDP is deemed weak. Third, it addresses whether it is a good opportunity for investors to invest in India considering the market corrections and possible 'buying the dip' scenarios.
• 06:00 - 09:00: Current GDP Growth and Challenges The chapter focuses on the current state of GDP growth and the challenges associated with it. The speaker emphasizes a data-driven approach to discussing the economy, particularly focusing on real GDP growth rate as a key indicator. The discussion seeks to determine whether India's economy is fundamentally strong or facing challenges, advocating for decisions based on facts rather than opinions.
• 09:00 - 12:00: Issues with Private Consumption and Savings The chapter discusses the significance of real GDP numbers and how they are tracked by international investors as a crucial metric before making any investments in an economy. Sourced from the Indian Express, the chapter delves into the real GDP figures and explains the real GDP growth rate. A major focus of the chapter is on the distinction between real GDP and what might be termed 'fake' GDP, highlighting that there are two types of GDP. The 'real GDP' is emphasized as the key indicator to consider.
• 12:00 - 15:00: Foreign Direct Investment Insights This chapter provides an insight into the concepts of nominal and real GDP. Real GDP is the actual economic output whereas nominal GDP includes inflation in its calculation. The importance of considering inflation when evaluating GDP growth is highlighted. It also references the monetary policy of the Reserve Bank of India (RBI), which targets an inflation rate between 4% and 6%. The chapter emphasizes the need to look beyond the impressive GDP figures often highlighted in headlines (such as 9% to 11%) by considering the inflation component.
• 15:00 - 18:00: INR Depreciation and Economic Issues The chapter discusses the concept of Real GDP, which is crucial as it reflects the actual economic growth by adjusting for inflation. The text implies the importance of focusing on real GDP rather than nominal figures to get a true picture of economic status. The chapter also highlights concerns about India’s economic health, pointing out that the real GDP growth rate is not as favorable as it should be, particularly when looking at the data from the last 5 years, starting from 2019.
• 18:00 - 21:00: Strategy for India's Economic Growth The chapter discusses the economic growth rate of India, highlighting that while the average GDP growth was 6% in the past, it has declined to an average of 5% over the last decade. The discussion emphasizes the significance of even small percentage changes in GDP growth, particularly for a developing country like India with a relatively small economic base.
• 21:00 - 24:00: Challenges in Emerging Industries The chapter discusses the economic growth of emerging industries, using India and China as examples. In 2007, China's economy was around $3.7 to $3.8 trillion, similar to India's current economy. Since then, China's economy has grown to nearly $18 trillion. The discussion highlights that even a small percentage of real GDP growth can lead to significant economic expansion, particularly when the starting economic base is large. It emphasizes the potential for growth in India's economy as it begins from a smaller base, suggesting that a strong GDP number can have a substantial impact.
• 24:00 - 27:00: Importance of Foreign Investment The chapter titled 'Importance of Foreign Investment' discusses the slow growth rate of GDP, highlighting that it is currently 5.4%, with a projection to grow at 6.5% as estimated by RBI. A data point is introduced to explore reasons behind this slow economic growth, pointing towards the significance of private investment. Further details or analysis on the topic are suggested to be vast enough to cover three hours of conversation, indicating a depth of discussion on foreign investment's role in economic development.
• 30:00 - 33:00: Investment Strategies for Individuals Chapter titled 'Investment Strategies for Individuals' emphasizes the importance of understanding domestic consumption in India, as it constitutes nearly 60% of the GDP. It highlights India's young demographic and its significant role in the country's economic growth, indicating that private consumption plays a crucial part in the economy. The chapter possibly delves into how investment strategies should consider such economic factors to effectively cater to the Indian market.
• 33:00 - 35:00: Conclusion and Final Thoughts The conclusion discusses the slowing growth rate of private consumption. It notes how the apparent growth was influenced by the compensating factor of negative growth during 2020, and provides a compound annual growth rate (CAGR) of 5.9% since 2014, and 4.8% since 2019. The section ends by posing the question of why private consumption is not increasing rapidly.

Analysing India's SLOW GDP (& its impact) | Akshat Shrivastava Transcription

• 00:00 - 00:30 hi everyone so something strange is happening in the Indian economy for example if you take a look at this graphic you would realize that India is set to become the fourth largest GDP beating Japan so this will give you a feeling of Pride you will think that you know what everyone in India is becoming richer on the flip side if you read headlines like these that close to 80 CR population is availing free Russian so what exactly is happening on the one side we are saying that you know what we are a very big GDP we are a very
• 00:30 - 01:00 prominent GDP on the flip side our passport ranking is falling INR has weakened to its lowest ever Point people are availing free Russ so three questions come question number one that is India's GDP fundamentally strong or weak number two if it is weak then what precisely is it where we can focus and improve our GDP and third and most importantly that if you are an investor should you be investing more money in India right now because markets have corrected and it might become a great buying the dip opportunity or should you
• 01:00 - 01:30 start focusing more on the US market now or some other market so let's have this conversation in a very non nonsensical datadriven manner I'm not here to present my opinions I'm going to speak everything with facts and data so let's answer question number one with actual data that is India's economy fundamentally good or bad at this juncture now there are many facets to analyzing the economy whether it is growing not growing Etc but one key data point that we need to track is the real GDP growth rate now this is one of the
• 01:30 - 02:00 most important numbers which is tracked by The Economist by International investors before they make investments in any economy now here is the entire data the source of this data is Indian Express and they have done a good study on this topic and have given the exact real GDP in a LH cor terms and have explained the real GDP growth rate now comes a natural question that what is the difference between real and fake GDP so if this is real GDP what is the meaning of fake GDP so basically the point is that there are two types of GDP
• 02:00 - 02:30 one is called as real and another is called as nominal now nominal means stated GDP now stated GDP means it's a combination of real GDP plus inflation data okay now inflation in the economy as we know that as per the monetary policy Committee of RBI we have an inflation targeting rate of 4 to 6% okay usually we would not want the inflation to be very high so sometimes when you read GDP headlines that okay India's GDP has grown by like 9% or 10% or 11% or something like this
• 02:30 - 03:00 we might be speaking about nominal what we need to care about is the real GDP now real GDP means that if you adjust things for inflation if you take inflation out you get the real GDP now this real GDP data is very very important and unfortunately India is not painting a very Rosy picture because if you consider the GDP or real GDP growth rate this column will exhibit this now from 2019 if you consider the Last 5 Years our real GDP growth rate is close
• 03:00 - 03:30 to 6% on an average now this situation becomes even Grim if we consider the last 10 years data now in that if you take a look at the data then the average GDP in the last 10 years is only 5% real GDP growth rate now when people throw or Economist throw such numbers 5% GDP 6% GDP it doesn't hit us right I mean we might think that okay half a percent here there 1% here there how does it matter well it matters a lot because India is growing from a small base now
• 03:30 - 04:00 just for context India right now is roughly a $3.5 trillion economy China in 2007 was a 3.7 3.8 trillion economy now they are close to $18 trillion economy so they have achieved a lot of growth why because once an economy becomes big right even if they are adding like maybe 2% real GDP it expands their base mode now since India is growing from a very small base for us a good GDP number
• 04:00 - 04:30 would be at least 7% but unfortunately right now and in the previous quarter our GDP grew only by 5.4% it is estimated by RBI that we will grow at 6.5% this is a very slow moving GDP so comes the natural question that okay why is it that our GDP is growing slowly now this in itself is a topic worth 3 hours of conversation but there is a very good data point that I was able to find for you so here is the data point and you need to understand this column this is called as private
• 04:30 - 05:00 spending column right and here the first key fact that you need to understand is that almost 60% 6% of our GDP comes from domestic consumption why because India is a land of aspirations we have a lot of population our demography is Young so we consume a lot more things so therefore our domestic consumption is very important contributor to GDP now what is happening is that if you take a look at the growth rate of this column pfce to private consumption if you take a look
• 05:00 - 05:30 at the growth rate of that it is slowing down you will see that okay this is a very good number well because of the fact that 2020 people hardly consumed there was negative growth rate so it got somewhat compensated here but since then net net it's not as if that we are growing at a very fast rate if we do a cagr calculation from 2014 last 10 years we have only grown at 5.9% if we take 2019 onwards we have only grown at 4.8% now comes a natural question okay why is our private consumption going
• 05:30 - 06:00 down problem well the situation there is that the government has introduced crazy amount of Taxation little bit of discretionary income also even that has been wiped off why am I saying it because again you can take a look at the data point which is called as savings to GDP ratio right now India's savings to GDP ratio is at a five decade 50e low so this again does not paint a very healthy picture also folks in case you are interested in learning more about economics finance stock market how to to protect your wealth I teach a
• 06:00 - 06:30 macroeconomic driven course it has limited seats it's a live course it has a 95% completion rate in case you are interested you can check the links in the description and comment box I run maybe like three such courses in a year so in case you are interested in learning how to pick stocks how to do fundamental analysis macroanalysis understand economics then I teach this course in very easy simple to understand language please check the links in the description and comment box the feedback has been excellent with that said let's move over to the main video now despite these negative sentiments around high
• 06:30 - 07:00 taxation consumption not picking up we seem to be in denial for example a classic case study here would be that for example that this was a recent news and this was released by pib and here you can see that this announcement was made on 12th December 2024 that India's FDI Journey hits $1 trillion this is an economic Milestone and we are doing so wonderfully well this is a a very good graphic was made that you know what FDI Jo foreign investments IND that is just scaled New Heights is that really true right and are we even acknowledging problem why because if you actually
• 07:00 - 07:30 study the relevant number here that number is net FDI it's not about FDI okay people are maybe investing 100 rupees here but if they're pulling out 80 rupees back then the net FDI is only 20 so is the net FDI growing or not that is a more relevant Matrix for example this study comes from the print which analyzes net FDI on year-wise basis and the source is RBI data so this is relevant data and what you will notice is that for example if you consider like in 2021 the net FDI picked up then it
• 07:30 - 08:00 has been consistently going down so comes a natural question then why is it that FDI which is foreign direct investment is kind of shrinking in the Indian market well there are a lot of reasons for that but one quick reason is that India as an emerging economy foreign portfolio investors are not betting on it on a long-term basis as of now now multiple reasons might be there that for example we are not creating the type of companies that will attract these type of Investments investors are not finding any Alpha there are complicated labor laws there are complicated lying acquisition laws the
• 08:00 - 08:30 problems can be hundred this is beyond the scope of this video as to why FDI are shrinking that in itself is a video but what I wanted to explain it to you is that our net FDI are shrinking as we speak you will see that how much net money has come this green candle indicates how much net money is being added and this red money is the amount of money that is being expatriated and this is what the worrying sign is that while FDI is Flowing because there is more money that is printed in the world that a 48 unit of money is coming 3435
• 08:30 - 09:00 is going out of India so net right so this is a problem that is not getting solved for India now what is the bigger problem here well the bigger problem is that if you take a look at INR depreciation this is going out really fast for example if I show you the entire history so max right for example take a look at Last 5 Years we are sitting at the weakest INR right now now the problem here is that if INR becomes weak then it should give more incentive for foreign investors to come
• 09:00 - 09:30 and invest in India now why is that the case because it's very simple so let's work through an example so let's say in 2014 1 USD was equal to 60 rupees okay so with 1 USD you can buy 60 rupees in 2025 with 1 USD you can buy 85 rupees so basically these guys can buy more of INR so it has become cheaper for them to buy INR or invest in the Indian economy but are they investing they are not and therefore we are seeing a net outflow of FDI now what about fi so fi are Market
• 09:30 - 10:00 participants so foreign investors basically they again take a look at this graphic on money control you yourself will be able to understand that for the last three and a half four odd years even F foreign investors have been net sellers in the Indian market and this is again proving to be a big problem we do chest thumping that you know what we don't need like foreign money ET that's a matter to celebrate but to cut the long story short we do
• 10:00 - 10:30 not build wealth just by consuming domestically we have to export some kind of service or get foreign investments in unless we are able to do that there is no wealth growth again let me explain it to you by using a simple example for example we built very big leader statues and whatnot I will not name the statue now think about it that is it really generating real wealth for example if you a tourist based in orisa up until this point you might be going to go up now let's say a statue comes and and you go to that particular state to view that
• 10:30 - 11:00 statue now have you really contributed to the GDP or wealth growth of the country not really because that money that oresa tourist might have spent in Goa now he is going to some other state and spending it so this is not real wealth growth the real wealth growth would be that because you built that statue a lot of foreigners are coming and bringing foreign wealth with them so that unfortunately is not happening and unless we export something we cannot say that our economy is fundamentally strong now this again is an interesting graphic that just Builds on the point that I was
• 11:00 - 11:30 explaining you that what about Indian companies are they even investing in India or are they going outside India now even Indian companies have started to spend more money outside India because at an aggregate level even they are not seeing the returns so this can be seen by this graphic these are foreign investments by Indian companies and they are spending more money here so just to summarize this section there have been three problems number one our real GDP growth has been really slow number two there has been a significant slowdown in fbii and foreign institutional investments in India and
• 11:30 - 12:00 number three that despite the currency devaluation and INR falling to its lowest levels we are still not seeing foreigners or foreign buyers buying the Indian market so then comes a natural question that okay what can we do in order to turn around this situation so again we have to just work on that same principle and we need to do three things number one we need to bring in foreign investments we need to accelerate our GDP and number three we need to build some kind of competitive Advantage now let me start with Point number three what is the meaning of building
• 12:00 - 12:30 competitive Advantage now if you consider cities like Pune Hyderabad Bangalore then these were it hubs one could argue that the growth of IT industry propelled these cities and literally built wealth in these cities why because it workers in India were working for multinational corporations across the globe especially us Europe based and they were bringing US dollar and Euros back to India but unfortunately it has been on a slow trve but nevertheless the growth of the IT industry indicated some kind of competitive Advantage for India that we had young demography hardworking English
• 12:30 - 13:00 speaking good at Tech so all that combination allowed us to bring foreign wealth now in 2025 we are sitting at a crossroad wondering like you know what that next layer of growth for India would be our manufacturing is growing at maybe like 2 3% a year which is really slow it is slowing down tourism we are really bad at it in terms of bringing foreign tourists in fact we have been losing ground Goa has been getting a lot of negativity but honestly like foreign tourists have dried up in India at a pan India scale du to safety issues bunch of
• 13:00 - 13:30 other different things so there seems to be no strategy let me present a counter question to you that what are some of the fast growth industries in the world so this would be semiconductor artificial intelligence robotics now let me ask you question number two that which companies in India are throwing their Gauntlet or working out in this space and you see them becoming like top three four five players in the world so right now is zero there is no one literally which is representing India at that scale where we can win the semiconductor race artificial intelligence race crypto race robotics
• 13:30 - 14:00 race we not even trying to win those races so then comes that okay fine since we are unable to export and generate those exports what about we make Indian market very lucrative for investors that we do something for example Dubai what it has been able to do substantially well is that it has been able to bring a lot of foreign wealth through real estate Investments so can India do something now this comes down to a very simple concept of appealing to the investors now investors for example if you are an American investor or you are a European investor why would you look
• 14:00 - 14:30 at the Indian market very simply put that if someone can come and invest1 and can quickly make 20% return on it or the return is adjusted as per the risk now what is happening in India over the last 5 six years is that our GDP has been growing at 56% Us's real GDP has been growing at 4 5% right so then comes a very natural question us just for context Us's GDP is roughly $30 trillion India's GDP is $3.5 trillion we are almost nine times smaller than the US so
• 14:30 - 15:00 the risk of investment in India is fairly high and since if you're are not giving like even 5 six% growth or giving almost equal growth to foreign investors that is the reason why they are leaving the market so building some kind of investable asset class in India is very very important now up until this point you could say that okay this was the Indian stock market which was giving excellent returns but if you adjust it for rupee depreciation honestly you would see that those returns are not like crazy returns compared to the US
• 15:00 - 15:30 market in fact US market has done better than the Indian market over the last few years now one of the key things that needs to happen fast is that we need to cut taxes now if there is a kind of a tax cut then it will Propel our markets also it will give more money for consumption also which will accelerate our GDP but unfortunately then the counter question becomes that hey how are we going to spend money on freebies this that stuff so for that now I I can keep on ranting about freebies that freeb should go away this that stuff but
• 15:30 - 16:00 a more sensible Point here would be that tax rationalization could take place for example instead of taxing a handful of 2% tax direct taxpayer the tax net can be cast wider maybe 5% people can be brought into the tax Gambit and be made to pay direct taxes that will relieve some pressure and will give some amount of money or spending power to people who are already paying crazy taxes this needs to happen now I would request you to share this video with your friends on different social media platform take out
• 16:00 - 16:30 this clipping do something about it because if there is enough social media noise maybe something will happen or something positive will happen on this budget now comes the final section that okay if nothing happens and if there is no tax cut there is no Fast Fix then what is it that we are looking as investors and is there something that we can do so number one concern is that markets are already falling we have corrected by roughly 11% from the top on nfty will we fall more see 10 15% correction on the stock market happens very frequently this is not the first time or the last time this will happen
• 16:30 - 17:00 but does it mean that Indian markets will vanish the short answer is no why here is like mutual fund sip contribution right and and here is a very interesting graphic on it that in September of 2024 the Sip inflow was at an alltime high of 2459 this was 52% higher than the 2023 data now yes in 2024 towards the end the markets have started to correct so some people would have stopped their sip is that stuff but we can't deny the fact
• 17:00 - 17:30 that a lot of sip money is coming into the market so it's not as if that if you're a stock market investor in India you will lose your wealth No in fact stock market is likely to do fine we might grow our Nifty at 12 133% cagr but the inflation in the economy will be high so the real growth rate on your investments in India might only be 2 3% now the reason why I'm saying that is very simple that the segmental inflation for you people who are investing in the stock market works very differently compared to how it works for someone who's living in a village right now
• 17:30 - 18:00 India's average inflation might be 5% so that includes people who are availing freebies who are living in Village owning their own house but if you're someone who's investing in the stock market most likely you living in like a Metro all that stuff so for you inflation will be 10 and if your nift is growing at 12 for you then the real growth rate for you is only 2% after taking so much risk so this is one but having said this you don't need to worry about the fact that Indian market will get crushed by 30% 40% I don't think that that is likely to happen unless there is a World level fall so to say say so then comes the second question
• 18:00 - 18:30 that okay fine but would it make more sense for me to go to the US market now because I do not see like artificial intelligence semiconductor opportunities in India so the short answer is yes a part of your portfolio should go to US stocks for sure the reason is very simple that there are certain types of companies that you can explore only in the US now which type of companies you can pick in the US I'll write a detailed note on my member Community tomorrow so again a small pitch in case you are interested in learning about fundamental style of in testing I teach that just try member Community for a couple of
• 18:30 - 19:00 months that itself will give you a lot of confidence the next point being that okay fine if I reflect on the last 10 years it hasn't been that great from a GDP growth perspective data is now coming out it's not looking very nice uh even from like fii investment perspective it's not looking great if situation continues like this for the next 5 years then what happens to my investments well we will witness a fairly High inflation in India I'm quite certain that that is going to happen so you need to understand how to protect
• 19:00 - 19:30 your money how to do hedging of your money have some positions in international stock diversify your portfolio really well doing these things is going to be non-optional now just simply doing sip making like 12% return and then wiping out that wealth by paying 11% through inflation it does not make sense please understand this please rewind this video watch it a couple of times it will give you more understanding there is also a link in the comment and description box in case you want to learn about the falling of INR and its impact on you please watch the video watch these type of
• 19:30 - 20:00 macroeconomic videos subscribe to my channel you will learn more thank you so much for watching and I'll see you soon