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This targeted GDP growth is an exercise in futility, the growth will have to happen organically, the population must be allowed to increase its consumption when it pleases and when it wants. Any forceful stuffing will only lead to increase in Leverage & Liquidity...
..which will lead to economic booms and busts.
If you take housing as an example: (all these are not accurate figures)
1. There are ~38crore families in India out of which the home ownership is ~3.8crores
2. Even if you assume the avg price to be ~25lakhs/house
..
If you take housing as an example: (all these are not accurate figures)
1. There are ~38crore families in India out of which the home ownership is ~3.8crores
2. Even if you assume the avg price to be ~25lakhs/house
..
3. We are looking at ~867Lakh crores as the market size for just housing! which is HUGE
4. The ancillary markets will be ~1.5x this value which is ~1300lakh crores
5. So housing and its ancillary can generate a GDP of ~2167lakh crores which is ~10x India's GDP...
BUT!!
4. The ancillary markets will be ~1.5x this value which is ~1300lakh crores
5. So housing and its ancillary can generate a GDP of ~2167lakh crores which is ~10x India's GDP...
BUT!!
What you are not taking into account is the leverage which comes along with this!
1. 80% of the home purchases are made using leverage with 10% upfront owner's equity
2. This gives us ~624lakh crores leverage! Even if you assume 9% and Tenure 25 years the EMI is ~64lakh crores
1. 80% of the home purchases are made using leverage with 10% upfront owner's equity
2. This gives us ~624lakh crores leverage! Even if you assume 9% and Tenure 25 years the EMI is ~64lakh crores
3. This works up to ~17,700pm as EMI for your home, which is ~2.12lakhs per annum per family! which is way less than what the per capita income is per family in India
4. This mad rush to buy homes or any other item to "Boost" economic growth will take us down a ruinous path!
4. This mad rush to buy homes or any other item to "Boost" economic growth will take us down a ruinous path!
Mind you the Indian HH debt is ~17lakh crores
A classic case of this is the U.S economy, in which between 1945 to 1965 the HH debt increased 10x from $29bn to $ 331bn - this lead to 8+ economic shocks in the U.S https://www.collaborativefund.com/uploads/How%20This%20All%20Happened-1abd7f.pdf) https://www.history.com/news/us-economic-recessions-timeline
A classic case of this is the U.S economy, in which between 1945 to 1965 the HH debt increased 10x from $29bn to $ 331bn - this lead to 8+ economic shocks in the U.S https://www.collaborativefund.com/uploads/How%20This%20All%20Happened-1abd7f.pdf) https://www.history.com/news/us-economic-recessions-timeline
This is just one facet of the economy, but the point that I am trying to convey is that, too much of GDP targeting and consumption will only lead the economy down the wrong path! - infact India itself has faced one recession each over the last 3 decades each one being more...
severe than the other and leading to more wealth erosion!
The only culprit which has killed most companies/people is Leverage and Consumption!
The govt will have to recognise this and should not do this nonsensical thing of targeting some GDP number which doesn't make sense!
The only culprit which has killed most companies/people is Leverage and Consumption!
The govt will have to recognise this and should not do this nonsensical thing of targeting some GDP number which doesn't make sense!
@wataboutery @anandaragavan @Raminations
@thekaipullai @chittukuruvi4 @JumbuTweeple @shreikanth @ksmkkbookscom @mrsubramani @HKA_2017 @DarkaButt
#investing #GDP #gdpgrowth #IndianEconomy
@thekaipullai @chittukuruvi4 @JumbuTweeple @shreikanth @ksmkkbookscom @mrsubramani @HKA_2017 @DarkaButt
#investing #GDP #gdpgrowth #IndianEconomy
