India growth story just unfolding on Dalal Street

NEW DELHI: The tax department rustles up, with great difficulty, 1,10,000 individuals reporting an income of Rs 10 lakh per year or more. However, the country has at least a million people who earn that much in the age group 18-59, finds the IIMS Dataworks’ countrywide research, covering over a million households and followed up with indepth interviews with over 1,00,000 working individuals for its Invest India Incomes & Savings Survey (IIISS), 2007.

It’s not just the taxman who has failed to strike an acquaintance with the millionaires: mutual funds and stock markets too are yet to discover them. Though an overwhelming majority, 90%, of the rupee millionaires have a life insurance cover, just over a third invest in mutual funds and merely a fifth directly into equities.

Yet, the survey finds that Indians are beginning to buy into the great Indian growth story. Over 1.76 million Indians in the paid workforce will make fresh investments in mutual funds within the next year, one million of whom would be new mutual fund investors.

Currently, there are 5.3 million mutual fund investors. Of the 3.5 million equity investors, over 80%, or 2.85 million, have put fresh investments in stocks in 12 months, and another 1.26 million new equity investors will come into the market in 12 months. Recent rumblings over over-valuation of the stock or property prices, even higher interest rates for consumer loans, may, at worst, impact demand adversely only in the short term.

The survey, carried out among 18- to 59-year-old individual income earners, excludes minors, elders and non-residents. It throws up pointers to sustained growth, building homes and making diverse financial investments. The country’s over 321 million workers in the 18-59 age group will go in for 11 million new houses in two years.

Apart from 20.56 million people who intend to go in for their first or additional life policy in a year, an additional 40 million are undecided on an extra/first life insurance policy. Even if a fourth of the fence-sitters can be persuaded to hop in, the country’s 105 million-odd strong life insurance policyholders (amongst workers) can

easily grow to 150 million within two years. Imagine what the 2.8 million people who are vacillating on whether to make fresh/new investments can do to the corpus of the mutual fund industry.

A large part of retail finance growth — everything from mutual funds, stocks, insurance and housing etc — will henceforth be driven by the country’s 403-odd class-I towns — with population of over a lakh, excluding top eight metros, 10 cities with over a million population, and Baroda and Surat. Over 2.2 million people from the towns will buy a life insurance policy in 12 months — with 1.5 million first-time buyers — demand for new houses here in two years stands at 1.5 million, and nearly two lakh new mutual fund investors and over a lakh new equity investors will emerge from the towns within the next year.

Among the 35 million paid workers in class-I towns, in 12 months, nearly 5% intend to pick up a new colour television, 4.2% a new refrigerator, 3.5% a washing machine, 2.8% a digital camera, 2.7% an air-conditioner and 2% will like tobuy a laptop. Clearly, all the buying intention backed by rising

affluence means that for just about every financial product — from equity and mutual funds to home and consumer loans — class-I towns will drive future growth.Tomorrow: Why People Buy And Why They Don’t