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India's total dematerialised, or demat accounts - necessary for holding shares and securities in electronic form - have surpassed the 17 crore mark for the first time in August, according to latest numbers from depositories.
A total of 42.3 lakh new demat accounts were opened in August - a month that saw heightened stock market volatility - pushing the total to 17.11 crore. Data from the depositories shows that the addition was marginally lower than July's 44.44 lakh demat accounts, but was significantly higher to the addition of 31 lakh in August 2023.
Interestingly, India's total demat accounts are now ninth in rank, when stacked against world's most populous countries, ie, the total demat count exceeds populations of countries like Russia, Ethiopia, Mexico, and Japan. This figure is close to that of Bangladesh's population.
The milestone has been reached just two months after the count had hit 16 crore. Since January 2023, more than 6 crore new demat accounts have been added, reflecting a growing appetite for equity investing among Indian households.
August also marks the sixth instance of monthly demat additions exceeding the 40 lakh figure. Previously, this milestone was achieved in December 2023, followed by January-February and June-July this year.
So far in 2024, nearly 3.18 crore fresh demat accounts have been opened, surpassing the total additions of 3.10 crore in 2023.

A section of analysts say many investors and traders tend to open demat accounts as markets rise, and participation increases. Other factors driving the growth include the ease of completing KYC online, possibility of switching brokers digitally, increased awareness, and investors running multiple accounts.

Kranthi Bathini, Director - Equity at WealthMills Securities, said that India is currently seeing a financialisation of assets, with equity awareness growing rapidly. The stock market still has a strong long-term growth potential, compared to other asset classes, he said. Investors are acting in a matured manner and focusing on long-term prospects, while also looking to capitalise on the short-term trend, he added. Overall, more investors are entering the stock market with a longer term perspective rather than a short one.
The strong returns from domestic markets since last year too also led to a steady influx of new investors. However, many analysts are now talking about rising valuations. Since January 2023 till date, India's benchmarks Sensex and Nifty have surged 35 percent and 39 percent respectively, while border BSE Mid and Smallcap indices have risen 94 percent each.
While there may be pockets of overvaluation, Bathini says every bull run presents opportunities, and it is crucial to seize them. In India, equities are under owned, with a relatively low percentage in individual portfolios, and it is this under-ownership that is driving more people to enter the stock market.
Nilesh Sharma, Executive Director and President of SAMCO Securities too said that while there may be pockets of over-valuation, Indian markets have shown consistent growth and remain stable compared to global peers.

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Introduction

India's trade landscape has witnessed remarkable shifts in recent years. According to a recent report by the Global Trade Research Initiative (GTRI), India experienced a trade surplus with 151 nations in the first half of 2024 while grappling with trade deficits from 75 countries. These figures underline India’s growing export prowess and the challenges posed by specific nations, particularly in industrial goods and essential imports. This article delves into India’s trade surplus highlights, the impact of trade deficits, and the crucial steps India must take to strengthen its trade balance.

India's Trade Surplus: Key Highlights

Between January and June 2024, India achieved an impressive trade surplus with 151 countries, accounting for 55.8% of its exports and 16.5% of its imports. This surplus totaled USD 72.1 billion, a testament to India's growing global trade influence. Major contributors to this surplus were the United States and the Netherlands, where India enjoyed a surplus of USD 21 billion and USD 11.6 billion, respectively.
The significant trade surplus underscores India's increasing exports in various sectors, particularly technology, pharmaceuticals, and services. The strong performance in these areas allowed India to offset its imports from these nations, contributing positively to the country's overall trade dynamics.

The Trade Deficit Dilemma

Despite a robust trade surplus with 151 nations, India faces a daunting trade deficit with 75 countries. These countries represent 44.2% of India's exports but a staggering 83.5% of its imports, resulting in a USD 185.4 billion trade deficit. This deficit highlights India’s dependence on specific imports, particularly industrial goods, crude oil, and coal.
India’s largest trade deficits were recorded with China, Russia, Iraq, Indonesia, and the UAE. China remains India’s largest trade deficit partner, with a deficit of USD 41.88 billion between January and June 2024. The lion’s share of India's imports from China consists of industrial goods, which account for 98.5% of the total imports from China. This situation emphasizes India's reliance on Chinese industrial products and highlights the need for India to develop its manufacturing sector to reduce this dependency.

Key Deficit Drivers : Crude Oil and Industrial Goods

While India’s trade deficit is significantly impacted by the import of crude oil and coal, the GTRI emphasizes that this is not a cause for concern. These imports are essential to power India’s growing economy, and the deficit related to energy imports is considered manageable. However, the think tank stresses that India must focus on reducing imports of industrial goods, particularly from China, as these imports threaten India's economic sovereignty.
Goods such as man-made filaments, rolling stock, glassware, and toys make up a large portion of imports from China, with over 50% of India’s global imports of these goods coming from China. This dependency underscores the urgent need for India to ramp up domestic production of critical industrial products and reduce its reliance on foreign imports, particularly from China.

Top Trade Deficit Nations

India’s top five trade deficit partners include China (USD 41.88 billion), Russia (USD 31.98 billion), Iraq (USD 15.07 billion), Indonesia (USD 9.89 billion), and the UAE (USD 9.47 billion). These countries represent a significant portion of India’s overall trade deficit, driven by high imports of crude oil, petroleum products, and industrial goods.
In addition to these nations, India’s trade deficit exceeds USD 1 billion with 18 other countries, including Saudi Arabia, Switzerland, South Korea, Japan, and Qatar. Despite these deficits, GTRI highlights that trade imbalances with countries exporting crude oil and coal are less concerning than deficits driven by industrial goods imports.

Strategic Approach to Trade Deficits

GTRI suggests that India should prioritize reducing its reliance on industrial goods from countries like China while maintaining strategic imports of essential resources like oil and coal. Deep investments in domestic manufacturing are critical to achieving this objective. By doing so, India can safeguard its economic independence and ensure a more balanced trade relationship with its global partners.
Moreover, the report also points out that India must be vigilant regarding imports of gold, silver, and diamonds, particularly from countries such as Switzerland, the UAE, and Hong Kong. Recent tariff cuts on precious metals have the potential to further increase imports, which could widen the trade deficit with these nations.

Changing Trade Partners: USA Overtakes China

A notable development in India's trade scenario is the shifting role of its top trading partners. In a significant revision, updated trade data for FY24 shows that the USA has overtaken China as India’s top merchandise trade partner. This shift is driven by an increase in imports from the USA, which now stands at USD 42.2 billion, making the USA India’s leading trade partner with a total trade value of USD 119.7 billion.
This shift reflects India's growing economic ties with Western nations and underscores the importance of diversifying trade relationships to reduce reliance on any single country, particularly China.

Conclusion

India’s trade landscape in the first half of 2024 reflects both its growing strength as a global exporter and the challenges posed by its reliance on imports, particularly from China. While a trade surplus with 151 nations is a positive sign, the significant deficits with countries like China and Russia highlight the need for India to enhance domestic production and reduce dependency on foreign industrial goods. By prioritizing deep manufacturing and diversifying its trade relationships, India can safeguard its economic future and position itself more securely in the global trade ecosystem.

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The recent developments in Bangladesh have implications for India not only in the political sphere but also in economic arena. Because of its fast pace economic growth over last decade Bangladesh has emerged as one of India’s leading export destinations in the world and the largest in the South Asian region in the recent years. In fact, in 2023-24, India’s exports to Bangladesh were higher than many of the world’s leading economies like Japan, Germany and France. However, the ongoing socio-political turmoil has impacted economic activities in Bangladesh and is very likely to adversely affect its bilateral trade relations with India.

One of the biggest achievements of former Bangladesh Prime Minister Sheikh Hasina has been the impressive economic progress over the last decade or so. During her tenure from 2009-2024, Bangladesh’s economy had grown at an average rate of 6.3 per cent per annum, which is among the highest in the world. The size of its gross domestic product (GDP) has more than trebled increasing from US$ 123 billion to US$ 455 billion. The per capita GDP has also increased from US$ 841 in 2009 to US$ 2,650 in 2024.

Propelled by a robust economic growth Bangladesh has moved up from being a low-income country to a low middle income country in 2015. The youngest South Asian nation has also been able to make a big dent on its poverty. As per the World Bank estimate, the proportion of population living in extreme poverty has declined from about 12 per cent in 2010 to 5.00 per cent in 2022. Additionally, the country has witnessed a significant improvement in its human development index (HDI) over the last decade. As per the United Nations Development Programme (UNDP), Bangladesh’s HDI value was 0.67 in 2022 compared to 0.56 in 2010.

The rising economic prosperity in Bangladesh has been accompanied, rather driven, by an impressive growth in country’s international trade profile. While its merchandise exports have increased from US$ 15 billion in 2009 to US$ 56 billion in 2023 the imports have grown even faster increasing from US$ 22 billion in 2009 to more than US$ 88 billion in 2022 before shrinking to US$ 67 billion in 2023. Increasing demand for imports of a variety of goods in Bangladesh has driven its trade with India. The bilateral trade between the two countries has surged remarkably over last one and half decades. The rise in bilateral trade has also been driven by intra-industry, especially in textile and clothing sector.

India-Bangladesh two-way trade in goods has grown faster than that of India’s total merchandise trade with rest of the world. While the value of India’s global merchandise trade in 2023 was 2.5 times the value in 2009, the size of bilateral trade was 5.5 times. Between 2009-2023, the size of bilateral merchandise trade has increased from US$ 2.4 billion to US$ 13.1 billion. India’s exports to Bangladesh have also grown faster than that of its total exports to rest of the world. As a result, the share of Bangladesh in India’s merchandise exports has increased from 1.2 per cent in 2009 to 2.6 per cent in 2023. Share of Bangladesh in India’s merchandise exports was higher than several big economies like Japan (1.2%), South Korea (1.5%), France (1.7%) and Germany (2.2%) in 2023.

India’s export to Bangladesh reached to a record level of US$ 14 billion in 2021 before declining to US$ 13.8 billion in 2022 and US$ 11.3 billion in 2023. The decline in Indian exports was mainly due to overall decrease in demand for imports in Bangladesh which has been caused by multiple challenges, like high inflation, Russia – Ukraine war induced supply chain disruptions, the Bangladesh economy has been facing during the post Covid period. The ongoing socio-political turbulence is likely to further deteriorate economic environment in Bangladesh and adversely affect its demand for imports from India.

The Indian export basket to Bangladesh consists of a variety of products and is substantially diversified and includes cotton, fuel products, vegetables, coffee and tea, automobile goods, machinery and electrical equipment, metal products. India’s imports from Bangladesh, on the other hand, are highly concentrated in few sectors. For instance, in 2023, more than 59 per cent of Indian imports consisted of textile and clothing products. Other items of import include fish, leather products and footwear.

Since a substantial proportion of Indian merchandise exports to Bangladesh consists of labour-intensive products an adverse impact on their demand would lead not only to loss of export earnings but also reduced jobs for the Indian workers. The industry that is likely to be the most affected in India is textile and clothing which is labour intensive and constitutes about 24 per cent of India’s total merchandise exports to Bangladesh. However, given that Bangladesh is also India’s competitor in textiles and clothing sector, especially in clothing segment, the overall effect is likely to be mix.

The disruption in Bangladesh economic activities would lead to reduction in demand for import of cotton, which is a major constituent of Indian exports to Bangladesh. Since Bangladesh is the largest market for Indian cotton, constituting about 35% of India’s global export of cotton, disruption in its demand will have an adverse impact on all the Indian stakeholders, including the farmers, involved in production and supply of cotton.

However, decline in demand for imports in Bangladesh could also lead to decrease in cotton prices in India which will help improving the cost competitiveness of Indian garment sector. Additionally, given that Bangladesh is one of India’s biggest competitors in the world market, supply disruptions in that country could lead to increase in demand for Indian garment products in the global market. However, it would be difficult for Indian exports to substitute the Bangladesh supplies in a major way as their capacity to fulfil the global demand in a longer term is less than adequate.

India also exports a number of agricultural products to Bangladesh. Edible vegetables are one the biggest items of agricultural exports and Bangladesh constitutes more than 20 per cent of India’s global exports of that group of products. The ongoing strife is likely to affect its demand and all the stakeholders, including farmers, involved in supply of vegetables will likely get the hit. Bangladesh is also a major market for Indian tea & coffee and likely to be impacted by the crisis. Although rice is also a major item of export from India to Bangladesh its demand may not be affected in a big way given that it is an essential part of their staple food. Another important sector that could receive negative effect is India’s energy sector as Bangladesh constitutes 2.6 per cent of India’s fuels export to the world market. Other key sectors that are likely to come under stress due to crisis in India’s eastern neighbour include metals products, mechanical and electrical appliances and transportation goods would.

Given that Bangladesh has emerged as an important destination for several Indian goods, the ongoing socio-political turmoil is likely to affect economic activities in that country and, consequently, dampen the demand for those goods from India. Although the crisis could present an opportunity for India in the global clothing market, Indian exports are unlikely to replace Bangladesh in a significant way due to the inadequate supply capacity of Indian exporters.

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Indian investors have traditionally concentrated on their domestic market due to strong economic growth and robust fundamentals. This home-market focus has often resulted in missed opportunities abroad, compounded by the complexities of transferring large sums of money internationally and the additional paperwork involved.

The Potential of Global Diversification

In contrast, global investors actively seek to diversify by investing in markets around the world. Consider this: can the Indian market offer the same scale of opportunity as global giants like Google, Nvidia, Microsoft, Sony, or Tencent? When we widen our scope to a global investment platform, numerous large, high-quality businesses become available, offering both the advantages of diversification and enhanced growth potential.
By focusing solely on domestic markets, Indian investors overlook many fast-growing sectors where Indian companies are either underrepresented or nearly absent. Industries such as gaming, artificial intelligence, robotics, and semiconductors are paving the way for the future, yet have little presence in India. From this perspective alone, global investing makes perfect sense.
Another notable benefit of investing globally is the favorable valuations. Indian markets have traditionally been more expensive, often due to limited floating stocks being chased by large flows of capital.
For example, Pfizer India trades at a price-to-earnings (PE) ratio of 45 on the NSE, while the same company trades below 20 in the US. Similarly, Hindustan Unilever’s PE in India stands at 62, compared to Unilever’s 20 PE in the US. These lower valuations in global markets are typically attributed to their larger depth, ample floating stocks, and institution-driven investor base.
In India, the scarcity of floating stocks and fewer opportunities often push valuations higher. For investors, valuation is a key metric, as overpaying for stocks increases the risk of losses during market downturns or periods of earnings declines.

Comparing Global Growth

It’s a common belief that India is one of the few countries experiencing strong growth. While India has indeed performed exceptionally well, other markets have also seen significant growth. An analysis of stock indices from countries like the UK, the US, and various European nations reveals that they have delivered strong results over the past decade, both in local currency and rupee terms. For example, the S&P 500 has achieved a compound annual growth rate (CAGR) of 10.5% in the past 10 years.

In addition to diversification and growth, another factor favoring global investing is the positive currency dynamic. The Indian rupee has consistently depreciated over the years, a trend that is likely to continue. Any further depreciation of the INR adds to the overall returns on global investments.

Taxation and Equalized Opportunities

Previously, investing in foreign equities was taxed at 20% with indexation, making it less tax-efficient compared to Indian equities. However, the latest budget changes have leveled the playing field, with foreign equities now being taxed at the same 12.5% rate as Indian equities. This development makes global investments much more attractive to Indian investors.

Building a Global Portfolio for Long-Term Growth

Indian investors can take advantage of the Liberalized Remittance Scheme (LRS), which allows them to remit up to USD 250,000 annually. By embracing this opportunity, investors can build a global portfolio that positions them for long-term capital appreciation and growth.

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The Unified Payments Interface (UPI) has solidified its position as the world’s leading digital payment platform by processing transactions worth nearly Rs 81 lakh crore during the April-July period of 2024, according to a recent report by global payments hub, Paysecure. This achievement represents a 37% year-over-year (YoY) growth, further cementing UPI’s dominance in the global digital payments landscape

UPI's impressive surge in transaction volume saw it processing an average of 3,729.1 transactions per second, marking a 58% increase compared to the 2,348 transactions per second recorded in 2022. This remarkable growth has enabled UPI to surpass major global payment platforms such as China’s Alipay, PayPal, and Brazil’s PIX in terms of the number of transactions processed.

In 2023, UPI handled a staggering 117.6 billion transactions, making it the highest in the world. Notably, July witnessed UPI processing Rs 20.6 lakh crore worth of transactions, setting a new record for the highest-ever monthly transaction value for the platform. This marked the third consecutive month that UPI transactions surpassed the Rs 20 lakh crore threshold.

The Paysecure report highlights that India is now leading the global digital payments space, with over 40% of all payments in the country being digital. UPI accounts for the majority of these transactions, playing a crucial role in India's rapid adoption of digital payments.

Dilip Asbe, CEO of the National Payments Corporation of India (NPCI), expressed confidence in UPI’s future growth, predicting that the platform could reach 100 billion transactions within the next decade. This growth is expected to be driven by the upcoming launch of credit facilities on UPI, further enhancing its appeal to users.

While June saw a slight dip in UPI transaction volume to 13.89 billion from May's 14.04 billion, the outlook for UPI remains extremely positive. A report by PwC India forecasts that UPI transactions will experience a threefold increase from 131 billion in the 2023-24 fiscal year to 439 billion by 2028-29. This would account for a staggering 91% of all retail digital transactions in India.

UPI’s success is not limited to India. The platform has been adopted in several other countries, including the UAE and Malaysia, where it is increasingly being used as a preferred payment method. The Reserve Bank of India (RBI) Governor, Shaktikanta Das, has emphasized the RBI’s focus on making UPI and RuPay global brands. This includes initiatives such as deploying UPI-like infrastructure in other countries, enabling QR code-based UPI payments at international merchants, and linking UPI with other nations' Fast Payment Systems.

With its unparalleled growth and adoption, UPI is not only revolutionizing digital payments in India but is also setting a global standard. As UPI continues to expand its reach, both domestically and internationally, it is poised to become a cornerstone of global digital financial infrastructure. The potential for UPI to drive digital transactions worldwide is immense, and its impact is expected to grow even further in the coming years, particularly with the upcoming introduction of credit on UPI and its increasing adoption in international markets.