Last 20 years and particularly since mid 2000’s has seen huge growth in consumer income. Look at every sector of our economy.
Agricultural Income has grown significantly on back of changes in crop patterns (Bt cotton etc.) and better productivity and improved irrigation
Govt pay scales have been revised considerably
Biggest driver is of course the growing private sector led by service economy and IT in particular. A big upper middle class has been created with unprecedented increase in wage levels. Campus starting salaries have gone up by 3-4 times since early 2000’s
This has driven the consumer spending and related consumption consumer goods and durables as well as Real estate. This has led to the 15% + returns in the broader market.
Some of these trends are slowing down particularly in IT and this would be the case for some time. The next 10 years it is difficult to see wage levels grow by this levels.
IT industry is facing slowdown for some time now and the effect is seen across other sectors also.
India still has to catch up on a lot of income measures but some of them like service sector salaries have caught up to global benchmarks. Agricultural income still has some catching up to do but are we reaching slowdown in productivity gains given the inherent structure of our farm sectors (fragmented, manual)
Obviously at some level this does not matter if you are picking the right emerging stocks but sometimes it helps me personally to make sense of broader trends. It helps also to set expectations on returns. I would be happy with a 10% broad market returns in next 5 years with 12-13% return on my portfolio. I would not be worried about not getting the 17-18% returns seen over last few years.
Question that comes to mind is that what are the sectors and trends that are still on the up that are going to give higher growth in the future - pharma? Agri businesses? NBFCs? Infrstructure?Power?