We Indians are exactly at a pivotal stage, attractive enough for the FDI's to shift their…
By: Parvathi Properties
Tags: Business Strategy, Real Estate Investments, Fdi In India, Economy Of India, Economy

INDIA TO BE THE NEXT ASIAN ECONOMIC HUB POST COVID?

We Indians are exactly at a pivotal stage, attractive enough for the FDI's to shift their investment from china. With population over 1.38 billion, we are a huge market as well as a huge work force. Will india beat china in few decades to be the next Asia's economic hub?? What is the effect of covid 19 on international economy?? How does it favour india? Read on...

Corona the new pandemic has made us all realize how weak we are. We always used to say "save mother earth" but it is not mother earth that we need to save, it is us we need to save from the repercussions of our own ill actions. Earth will stay for a long long time irrespective of the fact that, we are here or not.The pandemic effect can be explained under three headings.

1) Health impact

2) Economical impact

3) Monetary impact

HEALTH IMPACT

First effect of this pandemic is the feeling of helplessness, loneliness. This will have the immediate effect on the psychology of us, the community as whole. According to me, this pandemic will have profound immediate impact, but on long run, we are the species of high adaptability, so even this will pass.

I used to see many videos about corona, where even authorized people claiming it to have less mortality rate, (less than three percent). This message was used to be soothing and comforting, but the other important part everyone used to miss was, that It is highly contagious. So even with just three percent mortality rate, it still can kill many. We just need to hope the situation won’t be out of control as it did during the 1918- 1920 pandemic, Spanish flu.

DEAD BODIES OF SPANISH FLU

It had wiped out one third of our human population. Self-isolation and social distancing is not going to be the permanent solution. It is just the intermediate solution to prevent the future horrid. Since best of best brains are trying to find cure for the pandemic in the form of vaccine, very soon we all will resume our normal activities. This pandemic can’t stop us from expanding our species, with birth rate, well over four per second, we as species will expand still further, meaning to say, that the demand for natural resources will keep on increasing.

But the psychological impact might increase, rapid expansion of automobile industry, post covid, as many people may avoid the public transport. The revenue generated could be used to build better infrastructure by the government.

ECONOMICAL IMPACT

Negative supply shock is going to be the immediate effect of corona. With more and more countries forcing the self isolation of its citizens, the productivity will see steep decline, and the demand will remain same for many consumer goods. Also World economy was on the edge, just before the corona. United states federal interest rate was almost near zero for nearly over a decade now, it has carried out quantitative easing since 2008 till 2014. Now, again it has announced unlimited quantitative easing. Similarly, European union too has taken the similar decision. Japan has more than 200% debt to income ratio, USA more than 130% debt to interest ratio, the world economy was very fragile. China has just saw saturation of its phase one, economic growth. With yuan becoming stronger, and the yearly wage of Chinese, jumping from 150 dollars per year in 1990 to 13500 dollar per year in 2020, it is no longer attractive and no longer profitable to foreign companies, who had earlier established manufacturing units here. This is the main reason why foreign companies are planning a slow exit from china. They are targeting other countries like Vietnam, Mexico but India is one of the top priorities. Mainly because our GDP per capita is only 2100 dollars and Indian labor, standing at five dollars per day is five times cheaper, when compared to present china labor which stands at 30 dollars per day, making it very attractive to the foreign companies, to shift their manufacturing sector to India. With the stable government, India has actually become the second largest mobile manufacturer in the world next only to china.

This development just took less than a decade, six years to be exact. That is from 2014 to 2020. The tarnishing image of china due to pandemic and the trade war between the emerging power china and super power America has benefited and will benefit India in many ways. One will see war like situation between these emerging power(CHINA) and established power (USA) in the coming days. With better humanitarian setup like UNO, war will be avoided. But tensions between the super powers claiming south china sea might escalate because of its trade benefits to china. It is during this kind of period in history the monetary system was changed permanently, with Bretton woods agreement coming into existence. By this, all the currency’s link up to gold was removed, and every currency was linked to dollar which in turn, was linked to gold. The link of dollar to gold was also later removed by president Nixon in the year 1971 and hence perfect FIAT money came into existence. Many of the foreign countries actually see India as the nation of peace. India being the largest democracy, can be the next economic super power our government takes swift action.

One might wonder why there were many unsold apartment units in the past. That is mainly due to wealth inequality. Sixty percent of Indian GDP is from service sector, which employs only 20 percent people. But now due to the possibility of India becoming next big manufacturing hub, more and more people will account for the Indian GDP. This will directly impact the Indian real estate sector.

So, there is high possibilities of many foreign investments flowing into India in the form of FDI. MAKE IN INDIA will be a major mantra.

Make in india by Narendra modi

This will definitely increase the demand for better infrastructure, and will benefit the real estate industry hugely. Real estate has seen a lot of time correction now, more than over six years. One will see the rally in just a matter of year or two. Indian living standard will increase still further, increasing the demand for luxury real estate sector.

MONETARY IMPACT

Due to the corona pandemic ,Our country being developing country, with huge demand for real estate, the sector will see huge bounce back. USA has announced unlimited quantitative easing which means the federal bank will print new money, similarly ECB also has announced the same, printing the European dollar, India has announced LTRO from European central bank and also, Indian reserve bank has reduced the reverse repo rates to 3.75 %. This means the banks will get very less returns if they keep money in central bank. This encourages the banks to disburse more and more loans to business, housing and other sector, increasing the consumption and stabilizing the economy. Due to decreased reverse repo rate, banks will automatically decrease the fixed deposit interest rates, so common man would rather invest, than depositing in the banks. The value of deposited bank money will shrink over the periods, because of the inflation.

Having said all this, one can strongly say that India will be the ASIA’S NEXT BIG ECONOMIC HUB. This makes real estae the best risk free investment.

In every industry, there is buyers time, sellers time and myth about it. Buyers time is the time when you can choose from many sellers, and get the best product for compromised price. For real estate it is during the recession or economic depression.

So being smart investor, it is the “buyers time” you were waiting for. Grab the opportunity and invest smart, and BE RICH.