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At 10:00pm that night, India’s Prime Minister Narendra Modi announced that all 500 and 1,000 rupee notes—which accounted for 86% of the currency in circulation—would cease to be legal tender at the stroke of midnight that night.
The shocking maneuver was aimed at dismantling the cash-dependent black market, to put an end to India’s currency counterfeiting epidemic, to force more of the population onto the formal and taxable economic grid, and to help to further digitize the Indian economy.
India’s population was given 50 days to exchange their old notes for newly designed 500 and 2,000 denomination notes, after which their old notes would become worthless, or to deposit the old notes into a bank account.
You likely read a story or two, or saw numerous headlines about the chaos that ensued in the immediate aftermath of the announcement. Once clocks struck midnight on November 8th, a huge chunk of India’s population found themselves unable to interact economically.
India is the most cash-dependent country in the world, and up to that night, 95% of all transactions in the country were made with cash, 85% of workers were paid exclusively in cash, and 90% of all vendors had no ability to accept any other form of payment. Not only that, but nearly half of the population didn’t even have a bank account.
The plan for the cancelled 500 and 1,000 rupee notes was to replace them with the new 500 and 2,000 denomination notes, but these new notes weren’t quickly circulated and India seemed to grind to a complete halt.
Businesses had to shut down because they had no way to receive payments, employers didn't have a way to pay their employees, families struggled to buy food and other necessities, and even hospitals refused patients who could only pay in the old banknotes.
But despite the initial chaos, Modi’s plan seems to be working. The black market has been crippled. The new 500 and 2,000 rupee notes are less vulnerable to counterfeiting because of their advanced security features. The move has helped to wipe out tax evasion and corruption in one of India’s most cash-intensive sectors, real estate. And has moved the population into greater financial inclusion, helping to boost growth and modernize large swaths of the Indian economy.
Many people have been forced to open bank accounts to save their money, with India’s largest public bank, the State Bank of India, reporting that it has been opening approximately 50,000 new accounts per day in the aftermath of the announcement.
India is the fastest growing economy on the planet, and this move, while having some negatives in the short term, will be a great benefit in the long term. This abrupt demonetization is ultimately one of many growing pains that India will face on their path to becoming a major world economic powerhouse.
India’s incredible growth story is one that offers smart investors opportunities to make an absolute killing. And this demonetization story presents one such opportunity. One Indian bank in particular has a lot to gain from Modi’s demonetization and the move of India’s population into modern banking.
Even before Modi’s demonetization move, the Indian banking sector was growing at an even faster pace than the Indian economy itself, and the demonetization action had record numbers of unbanked citizens clambering to open new bank accounts.
The private sector bank in question has been experiencing explosive growth for several years and has seen a 160% increase in the number of branches within the last 6 years alone.
But what’s most attractive for me about this bank—and what sets it apart in the highly-competitive private banking sector in India—is that it has made an effort to attract India’s young, educated, and tech-savvy population via its creation of India’s first digital wallet.
And this strategy is working. The bank’s digital wallet app has been downloaded by almost 4 million users since its launch in February 2015. Add this appealing strategy to the fact that the company has experienced 11% year-over-year revenue growth and 14% earnings growth, and has an extremely low P/E ratio compared to the Indian average, and we have a really interesting undervalued growth play in the fastest growing economy in the world. It’s a home run.
At this moment, India is the fastest-growing major economy in the world – with a growth rate of 7.7% per year.
[You must be registered and logged in to see this image.]
And that 7.7% growth rate is also the average rate of growth in India over the last 10 years. That’s a rate much higher than even China’s projected growth rate of just 6.3% -- and this growth is being fueled by a surging middle class.
[You must be registered and logged in to see this image.]
But that aggressive rate of growth is just part of the reason why there’s enormous potential in India right now.
India’s GDP per capita is $1,820… that’s 29 times lower than the U.S. GDP per capita!
The average American earns $130 per day… while by comparison, the average Chinese person earns just $20 per day.
But the average Indian earns just $10 per day.
What this means is there is a tremendous amount of room for growth.
And speaking of growth...
According to the United Nations, the population of India is projected to surge beyond China’s 1.4 billion people by 2022…making India the world’s most populous nation. And it’s not just population growth – what makes India so ripe for economic expansion are the dynamics of the population:
We have an exploding population… and soaring economic growth… combined with a ridiculously-low starting point. In addition, India has embarked on a series of reforms that should lure increased foreign and domestic investment in both the short- and long-term.
source: investiv
The shocking maneuver was aimed at dismantling the cash-dependent black market, to put an end to India’s currency counterfeiting epidemic, to force more of the population onto the formal and taxable economic grid, and to help to further digitize the Indian economy.
India’s population was given 50 days to exchange their old notes for newly designed 500 and 2,000 denomination notes, after which their old notes would become worthless, or to deposit the old notes into a bank account.
You likely read a story or two, or saw numerous headlines about the chaos that ensued in the immediate aftermath of the announcement. Once clocks struck midnight on November 8th, a huge chunk of India’s population found themselves unable to interact economically.
India is the most cash-dependent country in the world, and up to that night, 95% of all transactions in the country were made with cash, 85% of workers were paid exclusively in cash, and 90% of all vendors had no ability to accept any other form of payment. Not only that, but nearly half of the population didn’t even have a bank account.
The plan for the cancelled 500 and 1,000 rupee notes was to replace them with the new 500 and 2,000 denomination notes, but these new notes weren’t quickly circulated and India seemed to grind to a complete halt.
Businesses had to shut down because they had no way to receive payments, employers didn't have a way to pay their employees, families struggled to buy food and other necessities, and even hospitals refused patients who could only pay in the old banknotes.
But despite the initial chaos, Modi’s plan seems to be working. The black market has been crippled. The new 500 and 2,000 rupee notes are less vulnerable to counterfeiting because of their advanced security features. The move has helped to wipe out tax evasion and corruption in one of India’s most cash-intensive sectors, real estate. And has moved the population into greater financial inclusion, helping to boost growth and modernize large swaths of the Indian economy.
Many people have been forced to open bank accounts to save their money, with India’s largest public bank, the State Bank of India, reporting that it has been opening approximately 50,000 new accounts per day in the aftermath of the announcement.
India is the fastest growing economy on the planet, and this move, while having some negatives in the short term, will be a great benefit in the long term. This abrupt demonetization is ultimately one of many growing pains that India will face on their path to becoming a major world economic powerhouse.
India’s incredible growth story is one that offers smart investors opportunities to make an absolute killing. And this demonetization story presents one such opportunity. One Indian bank in particular has a lot to gain from Modi’s demonetization and the move of India’s population into modern banking.
Even before Modi’s demonetization move, the Indian banking sector was growing at an even faster pace than the Indian economy itself, and the demonetization action had record numbers of unbanked citizens clambering to open new bank accounts.
The private sector bank in question has been experiencing explosive growth for several years and has seen a 160% increase in the number of branches within the last 6 years alone.
But what’s most attractive for me about this bank—and what sets it apart in the highly-competitive private banking sector in India—is that it has made an effort to attract India’s young, educated, and tech-savvy population via its creation of India’s first digital wallet.
And this strategy is working. The bank’s digital wallet app has been downloaded by almost 4 million users since its launch in February 2015. Add this appealing strategy to the fact that the company has experienced 11% year-over-year revenue growth and 14% earnings growth, and has an extremely low P/E ratio compared to the Indian average, and we have a really interesting undervalued growth play in the fastest growing economy in the world. It’s a home run.
At this moment, India is the fastest-growing major economy in the world – with a growth rate of 7.7% per year.
[You must be registered and logged in to see this image.]
And that 7.7% growth rate is also the average rate of growth in India over the last 10 years. That’s a rate much higher than even China’s projected growth rate of just 6.3% -- and this growth is being fueled by a surging middle class.
[You must be registered and logged in to see this image.]
But that aggressive rate of growth is just part of the reason why there’s enormous potential in India right now.
India’s GDP per capita is $1,820… that’s 29 times lower than the U.S. GDP per capita!
The average American earns $130 per day… while by comparison, the average Chinese person earns just $20 per day.
But the average Indian earns just $10 per day.
What this means is there is a tremendous amount of room for growth.
And speaking of growth...
According to the United Nations, the population of India is projected to surge beyond China’s 1.4 billion people by 2022…making India the world’s most populous nation. And it’s not just population growth – what makes India so ripe for economic expansion are the dynamics of the population:
“With more than 31% of its 1.2 billion people under 15, India would seem to have hit the economy lottery.”
We have an exploding population… and soaring economic growth… combined with a ridiculously-low starting point. In addition, India has embarked on a series of reforms that should lure increased foreign and domestic investment in both the short- and long-term.
source: investiv
