My maid came late this morning, on enquiring what was the reason, she responded - 'Daughter is unwell'. Concerned, I probed further. That's when she revealed that they bought a new fridge recently and her daughter has been on a cold drinking water spree since then. Talk about joy in little things :) 

I am also aware of a Carpenter, who changes his car every 3 years. On enquiring, he responded nonchalantly - I get bored out of driving the same car, hence I keep changing it every 3 years. 
Welcome to the new India that's young, big, hungry for success, and will not shy away from spending their disposable income. That's the biggest opportunity the corporations of the world are observing as things unravel.

Ridham Desai, MD at Morgan Stanley India shared some interesting insights on ET NOW  a few days ago. And if I have to share the biggest takeaway from that interview, it is this: " Discretionary Consumption in India is the next big thing, park your money there ". Apart from discretionary consumption, he was very positive about industrials & financials, but he sounded very bullish about discretionary consumption. And this morning's encounter with my maid just made things clear for me. So what is this discretionary consumption?

In terms of classifying goods and services that are considered non-essential by consumers, but desirable if their available income is sufficient to purchase them is discretionary. Basically anything beyond our basic necessities! So a fridge, color TV, automobile, travel, entertainment to name a few. But why is it suddenly the focus sector? Let's explore.
At a macro level, few important changes are happening to our country. But before we delve into that, let's understand some basic economic stats ( i promise you, it will not be jargon-laden content ). India's Per Capita GDP is $2000. It is 1/6th of China & 1/15th of the US. Now you must be wondering what is this per capita GDP now. It is basically the average income earned by a person in a given year. So if I convert that into INR, it today stands at around Rs.1,50,000/ annum or Rs.12,000/ month. One look at the history of India's per capita GDP and you will be in awe, as it has grown exponentially over the last few decades. Having said that India is still way behind the powerhouses of the global economy. Remember I told you we are still 1/6th & 1/15th of China & the US respectively when it comes to per capita GDP.

APNA TIME AAGAYA!
We have seen a silent revolution of sorts from the Govt. of India in the recent past. I am going to focus on just TWO of them for ease of understanding : 

1.PMJDY ( Pradhan Mantri Jan Dhan Yojana) 2. Corporate Tax Cut

PMJDY is in its 7th year now and it's been a blessing for the underprivileged. As of AUG 2020, there are around 40+Cr. Bank account holders under this scheme. The dark era of the past, where money didn't reach the concerned beneficiaries because of intermediaries /brokers is a thing of the past. The underprivileged are getting their bank transfers directly from the Govt. of India. Probably India is witnessing the largest financial inclusion campaign ever in the history of mankind.PMJDY is important as it provides an avenue for the poor for bringing their savings into the formal financial system. PMJYD has been the foundation stone for people-centric economic initiatives. Whether it's the Direct Bank Transfer( DBT) to the migrant laborers during the initial days of COVID or the increased wages under the MGNREGA scheme or even the Health Insurance scheme that has been extended to everyone. Thankfully we can now say goodbye to age-old crooked money lenders, especially in rural India! 

 But what has PMJYD to do with discretionary spending? Two things can happen, when you get cash in your bank - either you SAVE or SPEND. And the underprivileged for the first time feels equal & are happy to swipe their Debit cards to buy that new fridge or buy that 1st ever bike in their family. Need proof? Do visit D-MART and check out their clothing & furnishing sections, you will understand what I am saying, or just check the latest record of smartphone sales that India has seen. 

The second big wave that India has witnessed is the Corporate Tax Rate cut and thus bringing India on a level playing field. On September 20th, 2019, the base Corporate Tax was cut to 22% from 30% & here's the kicker - it was cut to 15% from 25% for new manufacturing units in India. The stock market jumped on that day as if there is no tomorrow, but why is this important for discretionary spending?

India will now start attracting global companies to set up their manufacturing units in India. That will lead to more job creation in India, which in turn means enhanced earning and that will lead to the growth of India's Per Capita GDP. And when that happens more people will spend on discretionary consumption. COVID was a speed breaker that brought the global economy to a temporary halt, but we have already started seeing green shoots of this phenomenon. There's also this " CHINA + ONE " strategy that global manufacturing giants are contemplating now especially after COVID exposing the vulnerability of just depending on one country for all of their manufacturing needs.

NEW INDIA

Visualize the TWO points that we discussed above. On one side we see the financialization of India because of PMJDY & on the other side, we see rising income levels because of new jobs that will get created. Both will contribute to people spending their disposable income on discretionary consumption baskets.

Maybe a few years down the lane( or maybe a decade), you will have your maid taking leave not for going to her hometown but for a vacation along with her family. That my friend is equality & progress for India! We will explore some sectors within discretionary spending, that can see an immense uptick in near future.
Signing off for this week, look forward to hearing from you all.