BETTING ON INDIA
Key pivots, an ongoing geopolitical reset and the material trading up of India is winning growing investor interest in India. EPISODE #117
Dear Reader,
A very Happy Monday to you.
Last week I stumbled upon a Clubhouse—it was first off the blocks with its audio social network—conversation. A Norwegian politician, Nikolai Astrup, was sharing his impressions about a recent visit to India.
Very candidly he submitted that it was imperative for everyone in the world to invest in India: ‘Partner and learn the culture’.
Astrup is not alone. Increasingly, regardless of what Western media chooses to write or ignore about India, we are hearing about growing global interest in the country as an investment destination. This is not only about numbers. Instead it is all about sentiment. So this week I explore the theme: Betting on India.
The cover picture is a slice of street life in India, sourced from Unsplash and taken by Marius Oprea. It resonated with me as it captures the different layers of India, which sometimes work at cross purposes. Thank you Marius.
A big shoutout to Sangeeta, Laxmi, Aashish, Premasundaran and Vandana for your informed responses, kind appreciation and amplification of last week’s column. Once again, grateful for the conversation initiated by readers. Gratitude also to all those who responded on Twitter and Linkedin. Reader participation and amplification is key to growing this newsletter community. And, many thanks to readers who hit the like button😊.
INDIA AHOY
Last week, while scrolling through Clubhouse for interesting conversations, I stumbled upon an interview with a Norwegian politician, Nikolai Astrup. The young politician was sharing his experiences as part of a Norwegian delegation which visited India recently.
What struck me was his optimism and confidence in India as an investment destination. And how he linked India’s fortunes with the world. In short, Astrup was making an unabashed pitch about India’s prospects in the next 25 years.
“This was our first trip outside Europe after the pandemic. And we chose India. And the reason is, I think, quite clear. India is a very important country, and its importance is going to grow in the years to come.
It (India) is important when it comes to the energy transition, for sure; but also when it comes to sustainability. So if India fails, on the Sustainable Development Goals, the world will fail, basically.”
And Astrup is not alone about making this claim. Institutions like the World Bank and International Monetary Fund, investment banks like Morgan Stanley and so on are making the same point.
The obvious question is how come? I will hazard a response.
But before that I will like to flag the fact that almost everyone lining up at the gates is driven by transactional intent. In other words, no one is going to put their money down for charity.
The Pivot
In the last two decades India has undertaken two key pivots in its strategic positioning in the world. Both have contributed in reordering the global perception about India.
One, under the leadership of Atal Bihari Vajpayee—going against the conventional stance, he hit the reset in India’s equations with the United States. Manmohan Singh, who succeeded Vajpayee, harvested the gains of the strong foundation. In the tenure of Narendra Modi, this relationship gained more miles, especially as it overlapped with a geopolitical reset—following the China-US fallout.
The other big shift is reordering the Indian economy and the recasting the global perception about it under Modi—wherein India is now seen as part of the solution and not part of the problem.
Whether it is climate change—committing India to net zero carbon emissions in 2070—or promoting trade—striking Free Trade Agreements (FTA) with the United Arab Emirates, Australia and working on similar deals with England and United States—India is increasingly contributing to global decision making. Its leadership of the G20 countries only lends it greater opportunity to grow this perception.
At the same time, the Indian economy today—estimated at $3.5 trillion—unlike say even as early as the 1990s, has much to offer in return for its ask from the rest of the world. As a result negotiations no longer degenerate into a zero-sum game.
Walking the Talk
Even a decade ago, the big headline about India was its levels of poverty. Its poor outnumbered the entire population of the United States.
An equally depressing statistic was that 600 million Indians defecated in the open (this was the constant refrain at every annual September summit of the United Nations in New York).
If indeed there is a big headline today, it is about India making unprecedented gains in its war against poverty—as the United Nations Development Programme reported, between 2005-2021 a staggering 415 million people were lifted out of poverty. I have written about this in detail; sharing the link below:
A key factor in this fight against poverty was inclusion—by enabling access to basic needs. What started out as an initiative in 2009-10, turned into mission mode in the last eight years. This addressed the basic material needs and in mitigating hardships arising from legacy deficits.
The following update is sourced from this year’s Union Budget speech:
Equipped 11.7 crore households with toilets;
Provided 9.6 crore LPG connections under Ujjwala;
Opened 47.8 crore Jan Dhan bank accounts;
Provided insurance cover for 44.6 crore individuals.
By any metric these numbers are impressive. Imagine that a decade ago 47.8 crore Indians did not own a bank account.
Consequently, a collateral gain of this is that these beneficiaries are stakeholders in the Indian economy now—inside, looking out and not outside, looking in.
The Expanding Middle
By tackling poverty, India created the basis to expand its middle class—weaponising its prospects since this cohort is always the dynamic core of any economy.
According to PRICE (People’s Research on the Indian Consumer Economy) report, this change is already underway. Its initial findings released a few months ago claims India’s middle class, already a sizeable number, would nearly double to 715 million by 2030-31 and then grow to 1 billion by 2047.
In the same conversation cited earlier, Astrup, underlined the significance of India’s expanding middle.
“This is a market of 1.4 billion people. Though they have 400 of the poorest billion on earth living in them, they also have a growing middle class.
They have an ever increasing need for energy. And there's going to be ample business opportunities for those who are willing to engage with India over time. So lots of opportunities.
And we see also Indian companies, of course, really doing their bit.”
For the record India’s annual per capita consumption of electricity—1,200 kilowatt-hours—is the lowest in the world. In contrast, the per capita consumption of electricity by Qatar, the outlier, is 182,541 kilowatt-hours.
As Astrup points out, playing catch-up is a clear business opportunity in India.
Future Bright
Clearly, India is still a work in progress. There is no ambiguity about the direction of change. The challenge is that there is so much to do in so little time.
Anantha Nageswaran, India’s Chief Economic Advisor, summed it up best in a piece he co-authored and published in Foreign Affairs last month.
“Even as India has made its economic framework much more transparent and easier to do business in, policymakers know that they have more work to do on many fronts….
…It should systematically dismantle the requirements of licensing, inspections, and compliances for the private sector. The state needs to do more to eliminate bureaucratic mindsets and train India’s workforce in skills required for advanced countries and the service sector.
Though much has been done in recent years to address the structural challenges that small businesses face, reforms must continue to eliminate the systemic barriers…..
…These ongoing reform goals will require the collaboration of India’s state and local governments.”
Not surprising then that all eyes are on India.
Recommended Viewing
Sharing the latest post of Capital Calculus on StratNews Global.
This time it is about the nascent trend of FaithTech in India. Yes, you read it right: it is about the intersection of faith and technology.
I came across a Substack post on the subject by Aaryaman Vir and followed up with an interview. Was blown away when I learnt that an app, Sri Mandir, had been downloaded 10 million times.
Curious to know your thoughts. Do watch.
Sharing the link below:
Till we meet again next week, stay safe.
Dear Anil
Thanks for this week's piece which has given us more reasons to feel proud of India. Not so long back, the focus was generally on the problems plaguing our country. Since childhood we have only heard about India's growing population, poverty, unemployment, filth etc. There was no silver lining because these problems seemed to be insurmountable. Now we have so many reasons to feel proud. Like you have listed out so many households now have toilets, LPG connections, most people have bank accounts and insurance cover. This reinforces our image of India shining. It's also so heartening that even foreign countries are interested in investing in our country. Who would have imagined that a foreigner could feel that it's imperative for everyone in the world to invest in India. Earlier we were a struggling country and now our fortunes can affect that of the whole world. What an achievement.
Dear Anil,
This week s picture from Rajasthan is so vibrant with peacock feathers and the snake charmer , who is a rare sight these days!!
India is a mix of so many heterogeneous and diverse factors.Though poverty is reducing and middle class is expanding, but we cannot deny there are vast inequalities of income and wealth, massive unemployment, population pressure,predominance of agriculture and low per capita income.
Our per capita electricity consumption still remains so low.We need to ensure reliable, affordable and sustainable energy for the growing population. In my opinion Jan Dhan Yojana is one of the best project for financial inclusion.It has led to access to credit and insurance, pension facilities to the poor and universal access to banking. India has become a major player in the world economy and is moving confidently on the path of prosperity under its dynamic leadership!!