India is just the fourth country after the US, Russia, and China to achieve a soft landing on the moon, and at a reasonable cost of $75 million. India’s space economy is expected to grow to $12.5 billion by 2025. The multiplier effects of space technology expertise will spill over into component manufacturing, satellite systems, telecom, and assembly, and most importantly, it will create highly skilled and high-paying jobs.
India is making its entry into another high-skill Industry — semiconductors. Advanced Micro Devices has announced plans to invest over $400 million in India. Foxconn, Micron, AMD, IBM, Marvell, NXP Semiconductors, and many others were attendees at the Semicon India Conference recently. Foxconn has already made remarkable progress in manufacturing Apple phones in India. The Indian semiconductor industry is expected to generate 12 lakh jobs.
Increasingly, pre-eminent global CEOs are highlighting India as a core pillar in their growth strategy; there is a flurry of visitors giving sound bytes on their interest, as well as investments into the country. Tim Cook speaks of India’s vibrancy and dynamism and highlights India as a key piece of Apple’s growth strategy.
Elon Musk ‘likes India a lot’ notes Walter Isaacson, who is writing his biography, and in his own words, the billionaire has commented, “I am incredibly excited about the future of India. I think India has more promise than any other large country in the world”.
NVIDIA CEO Jensen Huang and Sam Altman of ChatGPT visited India earlier this summer. Aptiv has opened a state-of-the-art facility in Pune. IKEA is accelerating its growth plans for India, looking to triple its workforce.
Eugene Willemsen, CEO – PepsiCo, spoke about untapped growth opportunities; Nestle’s Global CEO, Mark Schneider, visited India and noted that it’s not just an Indian decade but an Indian age. India was the fastest-growing global market for Mercedes Benz in 2022. CEO Ola Kallenius, in his visit, noted that global sales shrank 1% during the same period. Amazon’s CEO, Andy Jassy, announced additional investments in India. The Goldman Sachs Board met in India, and its CEO David Solomon said, ‘People see opportunity when they look at India with its expected high growth trajectory’.
This is not just hype, it’s reality. Anecdotally, recently leading Global Bank had a high-powered team travel from NYC to the iconic Ambit House at Lower Parel (among other destinations) in Mumbai, India, to assess the wealth management prospects of the Indian markets. Over a sumptuous seven-course innovative Indian meal served by Chef Manish Mehrotra, the top management of Daiwa (recent partner of Ambit Pvt Ltd) met the leading promoters and founders of the capital city and Daiwa’s Global CEO Nakata-san commented, ‘when you look for one single large economy, which can offer itself as a partner, and be able to sustain partnerships with other countries, India is the only country that emerges as that partner.’
With both the West and East, India seems to have established itself as a go-to destination for manufacturing as an attractive alternative to China and also provides an attractive, growing, vibrant domestic market with aspirational consumers.
On the ground, the impact of digital and physical infrastructure transformation is visible. A laborer in Mumbai can now transfer money to his family living in a village in seconds. 45% of global digital payment transactions now occur in India. Indian digital transactions outstrip the combined digital payments of the US, UK, Germany, and France, according to government statistics. Measures tied to digital identity and payments have vastly improved the ease of doing business and made the lives of millions easier. QR codes are ubiquitous in India.
The government has invested significantly in building physical infrastructure, highways, and railways. BharatNet is its next bold initiative, aimed at providing broadband connectivity to 6.4 lakh villages.
India’s growth continues despite a global economy that is sputtering. Europe, China, Japan, Russia, and North America are each struggling with challenges ranging from slowing growth, aging population, and slowing birth rates to shadow inflation and debt. In particular, China’s slowing economy, increasing internal focus, severe debt overhang, and geopolitical choices have created a recognition for de-risking supply chains.
The West is eager for India to step in and provide an alternative. India’s young, hungry, and growing workforce stands ready to oblige.
The government succeeded in leveraging the recent G-20 summit in Delhi to further highlight India’s readiness as a reliable partner to the West.
From an investment perspective, the equity market is recognizing the government’s initiatives in changing the fortunes of the economy. As a result of the banking cleanup, PSU banks have had a renaissance and are doing well in the markets. Select Central Public Sector Enterprises (CPSE) – listed entities in finance, power, tourism, and railways – are also experiencing growth, and valuations have re-rated. This is a pattern break from decades of investor focus on growth and consistent compounders.
Foreign institutional investors (FIIs) are now giving India its time in the sun, with the country looking like a consensus favourite as a long-term, consistent growth story. Morgan Stanley recently noted that investors were overinvested in China while India is the opposite. A flurry of global players are launching India-focused equity strategies.
So what should domestic investors do?
The answer is simple – you go really long in India. It will not be a one-way street. There will be ups and downs that come with the terrain; who said making money is easy? Investing is an acquired taste. It has to be cultivated, you play by the rules of the market and not your expectations, but that’s a discussion for another time.
We would caveat the positive vibes by noting that the market isn’t always the economy and vice-versa. The market has already priced in many of these positives in the short to medium term. Therefore, investors would be wise to exercise prudence and not chase returns or overextend their investment allocations, post a dramatic and sharp rally this year.
India’s investment story is likely to continue, driven by a large domestic consumer market, favorable demographics, competent entrepreneurs, and a government that is taking bold steps in successfully executing its vision. Chandrayaan-3 will be a memorable milestone on India’s path to a brighter future.
We’ve been here before, India has held promise for the world earlier and has not been able to sustain it. Who knows maybe this time it will be different.
