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Urban wallets may aid economy

Consumption and investment appear set to get a boost thanks to the government’s increased focus on infrastructure and development.

business Updated: Jul 27, 2009 21:22 IST
Devraj Uchil

Consumption and investment appear set to get a boost thanks to the government’s increased focus on infrastructure and development.

Market players believe that disposable incomes and government/corporate spending are on the verge of a sharp rise.

The government has proposed a total investment of over Rs 20 lakh crore in infrastructure with budgetary support of over Rs 6.2 lakh crore. Overall economic activity is likely to increase from this over the medium to long term. And domestic demand is would be boosted by the growth in spending and investment.

“More money in the hands of young urban middle class, which constitute majority of Indian population, would lead to higher saving and spend on discretionary consumption,” said Anand Shah, Head Equity of Canara Robeco AMC.

The opportunity for the retail sector is huge with the middle class shifting its shopping venue form mom and pop stores to malls. Presently organised retail holds only around 5 per cent of the market share with 95 per cent being contributed by the unorganised sector.

“India’s long-term growth story is an inter-play of both the infrastructure and consumption themes,” said Sivasubramanian KN, Senior Portfolio Manager - Equity, Franklin Templeton.

Rajnish Narula, chief executive officer of Canara Robeco, believes the retail consumption and financial sector would outperform infrastructure as driver of growth in years to come.

“Also with increasing life expectancy and failing joint family structure is prompting more people to go in for retirement planning, insurance and investment in equity,” Narula said.