Inside India - Part 1

February 11th, 2008 at 09:02am Jody Jungerberg

  Jody J. Jungerberg, MBA, CFS, ChFC, CFP® 

Most investors have been reading about the explosive growth potential of investing in emerging market countries. This includes
India.  It is the second fastest growing economy on the planet.  McKinsey Global Institute predicts that the average Indian’s income will triple by the year 2035 – and Goldman Sachs predicts that
India will rise to be the third largest economy in the world by 2035. 

I wanted to get additional insight into this incredible phenomenon and was fortunate enough to get some perspective from a client.  He and his wife were born and raised in India.  They left their native country to attend graduate school here in the US, and are both career professionals in Rockford.  He shared some of his perspective with me after coming home late summer from his annual trip back home:  I’ll be sharing this interview in 2 parts.   

When you were in India over the summer, what changes in the economy were the most profound in your opinion?  How about the overall standard of living?The biggest change was the level of investment going on. Folks that were conservative in their thinking had changed to thinking they must invest in this wildly successful market. Huge swings did not seem to bother the investors since they could see future potential.  

Do you believe that India is looking more and more towards trade with the rest of the world?  Has this historically been hampered or difficult? More than trade, India sees itself as a huge power house for manufacturing and software. Its English-based higher-education system is a large pool of resources that it feels it can offer the rest of the world - the opposite of our “outsourcing” frenzy. India wants more of that going on. 

Are the young people influenced by what the American young people are doing?  No change in this attitude at least among the middle and upper classes. They’ve always tried to copy the West. The difference is that the middle class is increasing by leaps and bounds so more and more people want to do what the West does. 

Can you tell me more about the significance of more and more individuals getting mortgages there?  What was the impetus for this trend and what was it like before?  Were your parents home owners?  Does this imply that – years ago – if young people went to college and “out to the real world”, they would move back to their parent’s home?  In the old days (about 20 years ago !!!) folks lived in their family’s ancestral homes until they were able to rent an apartment. Then most stayed in apartments until they had saved enough to buy an apartment. This was normally in their 50s or older. My family lived in “company subsidized housing” until they retired. My mom then bought her first home. My sisters did the same. However, one of my sister’s children works for Citibank, assesses people’s ability to pay on a loan and is himself thinking of buying his first home with a mortgage. He is about 30.  The “American dream” will soon be the “Indian dream.” 

Real estate is going wild in the big cities. Homes (apartments - or flats, as they are known) double in value in a year or two.  And, they’re not cheap. Housing in Mumbai can run into the $1M range for an ordinary flat.

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