Rural India - The emerging boom
I was listening to Aditya
Puri of HDFC Bank a couple of days back on Bloomberg. One of the things he
mentioned was the rural emphasis for his bank. The points he elaborated were
broadly:
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1300-1400 branches opened in the past 3 years, most of them in rural areas. (I can corroborate the same with anecdotal experience that I've observed in interior AP & TN.)
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A vast majority of the accounts being opened in these new branches have a much greater focus on deposits than on loans - Presently.
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With banking comes greater financial awareness, and soon the trend of taking loans, credit cards and consuming other financial products will explode in rural India.
Natural corollary of the above (my
interpretation):
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Consumption is likely to explode to unimaginable levels in the next 5-10 years in rural India.
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FMCG companies, consumer durables, service providers like banks, hospitals, educational institutions, restaurants, etc. are likely to see an entire new market in rural India in the next few years.
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With increasing rural prosperity will come a demand for better quality infrastructure - both physical and social
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This will result in enormous growth in diverse sectors like roads, farm equipment, power generation, healthcare, insurance, automobiles, shopping malls, entertainment, education, commodities, housing, telecom, etc.
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Multiplier effect on GDP is going to be immense. Imagine a scenario where the whole of Rural India (or at least a vast portion of it) becomes like Kerala. With the difference being that it is going to be driven by domestic prosperity instead of Gulf money. The result is likely to be a huge growth in GDP numbers.
All the above, would, without any doubt,
result in a virtuous cycle which will:
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Increase per capita income
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Reduce pressures on our major metros by creating employment opportunities closer to the native place of every villager
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Massive real estate boom
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Enormous increase in the market capitalisation of listed companies with a focus on the rural markets
My only question is: Who is going to benefit
from all of this?
Unfortunately, my hunch is that the rich
promoters of all these companies and the foreign investors who are investing
heavily in our markets will take the major share of the emerging
cake.
Very sadly, we Indians do not invest
sufficiently in equity markets. As per publicly available information, just 3%
of the savings of the entire Indian population goes into investing in the equity
markets - both directly and through mutual funds. What's even worse is that in
the nineties (prior to the Harshad Mehta scam), the figure had reached almost
13% of the savings.
We must correct this situation. Obviously the
government has a major role to play in ensuring this anomaly is rectified at the
earliest by encouraging people to enter the equity markets. However, this cannot
be left only to the government. Financial service providers - especially banks -
must develop an attitude to motivate their customers to enter the equity
markets. The must, for instance, facilitate passive index-fund investing through
attractively designed SIP offerings. This will certainly result in a win-win
situation for all concerned.
Will our bankers raise to the
occasion?
Regards,
