Weak inflationary numbers, falling property prices and a historic low cash rate means savvy investors may need to consider looking abroad next financial year to achieve meaningful returns on their investments.
James Mawhinney, founder and managing director of Mayfair 101, believes the Indian economy provides one of the biggest opportunities for investors looking to grow their capital.
Why India?
India is currently providing investors with a unique opportunity due to the demand for credit, the size of the nation and its current technology boom.
“If we study India, it’s an emerging economy with one of the highest rates of GDP growth in the last decade,” said Mr Mawhinney.
“There will be 600 million Indian nationals connected by the internet by 2021-2022, that’s 25 times the population of Australia that will have internet access,” continued Mr Mawhinney.
The 600 million is based on a government-led initiative to connect Indian villages to an online environment. In effect, this means half the population could be closer than ever to gaining internet access, and therefore being more mobilised, connected and informed.
India also currently has a demand for credit that is unmatched in Australia, and access to sophisticated payments and lending platforms mean that credit can be sourced from Western nations.
“The GDP growth [in India means] an enormous demand for credit. There’s a gap of at least 330 billion in India at the moment,” said Mr Mawhinney.
“The reason there’s such an opportunity, the micro SMEs that are driving the economy, they want to scale and are moving from being completely offline to almost fully digital,” he said.
“So this particular market is transitioning rapidly from being totally disconnected from the world to being totally connected and the population that they have and the growth is providing this opportunity,” continued Mr Mawhinney.
Eyes on responsible lending
As with any booming market, there are companies that are capitalising on heavy demand and restricted supply.
"For example, one of India’s largest B2B payments companies has loaned out over USD300 million to Indian businesses at 20-25 per cent with negligible delinquency rates, while other companies are charging up to 45 per cent for small business funding, which is a high cost of capital yet still worthwhile for many growing SMEs that need access to capital.”
Investors should be cautious of these opportunities where they look to capitalise also.
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