Despite its recent GDP growth while the developed world succumbed to recession, India is not a straightforward growth story.
One in 14 Indian children dies before they reach the age of five.
Only 51% of households have a water supply. Over 55% of households have no toilet facilities. If you live in rural India (as two thirds of Indians do) 74% of households have no toilet facilities and you are only 56% likely to have electricity. Rural Indians often lack basic household goods too. Only 33% own a table, just 44% a chair and 7% a fridge.
India has huge healthcare, education and infrastructure obstacles to overcome before it can even pretend to be “catching up” with the developed world. On a GDP basis, India’s income per capita ranks at about the same level as that for Cameroon and Mongolia, less than half of China’s and a sixteenth of that in the US.
The population size (1.17 billion) is both its problem and its potential. Over 60% of the working population are involved in agriculture (which contributed only 17% to GDP in 2008). Efficiencies can be made here and the large labour force offers huge potential. Urbanisation is still low (at less than 30%) but is rising and will continue to do so. Conditions are improved in urban areas, but often not hugely so (17% of urban households have no toilet facility). Infrastructure development is essential.
However, there is potential and the domestic economy is strong. But inflation presents a concern and the key fiscal and monetary policy decisions over the next few months are likely to heavily influence the growth of India over the longer term. It is likely to be volatile but the long-term investor in Indian companies should benefit from the realisation of some of its vast potential.
Caroline Shaw is a fund manager at Courtiers
