When it comes to dominant e-commerce and online retail markets, the U.S. is the undisputed leader among developed markets, while China has taken on a similar leadership role among developing economies. Investors shouldn’t overlook India’s potential to join those two titans.
India’s e-commerce/online retail space is compelling, but there’s a dearth of related exchange traded funds, particularly when considering that the landscape of such China- or U.S.-focused funds is well populated. Fortunately, there’s the VanEck Digital India ETF (DGIN).
DGIN follows the MVIS Digital India Index and lives up to its billing as a direct play on the increasing digitization of Asia’s third-largest economy. While the U.S. and China have been garnering most of the global e-commerce attention, it’s worth noting that India has been making overt strides to make tech a larger centerpiece of its fast-growing economy.
“India’s government has been leading the push in digitization with its ‘Digital India’ reforms since 2015. Smartphone adoption has taken off in India and most of the country’s population accesses the internet via their phones using low priced data,” noted Sunny Bokhari, VanEck associate product manager. “The government’s vision has been to democratize access to data, financial services and e-commerce using a mobile-first approach.”
Enviable Long-Term Outlook for DGIN
The above comments indicate that India is following a similar trajectory to China in that as its middle class grows and consumption turns inward, the retail focus will be online/mobile. That’s par for the course in many developing economies, which lack the brick-and-mortar retail infrastructure of Western nations.
In significant fashion, DGIN taps into that theme, as nearly 70% of its holdings hail from the technology and communication services sectors — two groups that provide foundational support to online shopping. Importantly, there’s significant room for growth on this front.
“E-commerce in India is just 7% of the overall market and has considerable room to grow,” added Bokhari. “The Indian government’s digitization efforts extend to e-commerce, exemplified by initiatives like the Open Network for Digital Commerce (ONDC), which is a government-backed ecommerce network aiming to create a level playing field in online commerce.”
Further adding to the allure of DGIN as a long-term play on India’s evolving economy are attractive demographic factors. For example, India could surpass China as the world’s most populous nation by the end of this year. Looking further out, India could become the world’s largest economy in the coming decades, and it’s already the biggest democracy.
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