India will be a $2-trillion economy in the next five years as its GDP growth is likely to average at 12 per cent in nominal terms powered by a huge consumption demand, Enam Securities has said.
"India's GDP is likely to grow at (an) average 12 per cent in nominal terms. Hence, India will be a $2-trillion economy by 2014-15," Enam Securities head-research, Nandan Chakraborty, and economist Sachchidanand Shukla said in a report titled 'India Strategy' released on Monday.
This growth will be led by the huge consumption demand in sectors like FMCG, power, auto (small car hub), IT and pharma, it added.
The brokerage firm said insurance companies, financial services and equity markets will flourish as the country's annual savings pool grows to $700 billion from $400 billion at present.
"More than half of this ($700 billion) could flow into financial savings. With favourable demographics and average seven per cent real growth, India can sustain more than 30 per cent savings rate akin to the Asian tigers, or China and Japan. This will transform the domestic financial services space," Enam said.
Life insurance penetration in India, which is already a $1-trillion economy, is estimated to reach a level of 4.4 per cent over the next two years as insurance companies focus on expanding into rural India, the report said.
Life insurance penetration in India stands at about 4 per cent at present. Only 26 per cent of rural and 60 per cent of urban population have life insurance cover.
"There is a huge scope for premium expansion. Life insurance penetration is relatively low in India with premiums/GDP at 4 per cent versus 6 per cent for developed nations. India is the fourth largest life insurance market in Asia ex-Japan and has recorded high 31 per cent CAGR over the past six years in total premiums," Enam said.
In terms of growth, companies like SBI Life, Reliance Life and Birla Sun Life offered significant opportunities for investment at attractive valuations, the report said.
Private insurers such as HDFC Standard Life, ICICI Prudential Life, Max New York Life and Birla Sun Life offered attractive valuations for investors due to high persistency ratios and longer duration of policies, it said.
