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In this week’s volume we are going to unravel the captivating story of India’s ascent in the international markets. When I think of India, I think of family and so I thought let’s bring on a guest author for the first time and learn about India from my uncle Sanjay Mehta, Deputy Director General, IMC Chamber of Commerce, Mumbai, India and Executive Secretary, Indo-Vietnam Chamber of Commerce and Industry.
🧠 Bigger Ideas
Recently I have been watching Shark Tank India and it has been quite awesome seeing the rise of these small startups and companies out of the most random corners of India. Ranging from young people that are tech savy to older folks that are trying to bring their small scale shops to a national scale. There seems to be some serious momentum behind the average Indian man or woman. I’m seeing some sort of trend shift when it comes to talking about India and Indians in general — we now see massive tech conglomerates like Google and Microsoft being led by prominent Indians. Indians in US government, trying to run for President, we see Indians going to the moon now. Cricket is coming to the Olympics this had to be the last pin to fall before people started noticing right? Maybe Tim Cook and Apple shifting parts of their operations to India?
It’s only been in recent times that we’ve been hearing more and more about India in global news, in our financial media here in the states and it is deservingly so. I remember a time where I went to India, and me and my brother would talk about which technologies they didn’t have yet, what infrastructure they didn’t have yet and we would be eager to arrive home to all of the delicacies and luxuries that the companies in the United States have to offer. If that’s how we thought about it I wonder how others here thought about it. Look how far we’ve come, now we have people like Ray Dalio of Bridgewater Associates talking up India, we have big name venture capitalist firms like Sequoia and others going into India and setting up operations, Jamie Dimon of JP Morgan is enthusiastic as ever about his boots on the ground in India. There is more pro India talk than there is bad smelly Indian lunches talk and to me that is a victory right there full stop.
Apple Opens First Store in India - Tim Cook visiting Mumbai to inaugurate the store
In order to talk accurately about this I had to have my uncle talk about some things that I didn’t even know about and so the following historical backdrop sets the stage for understanding India's journey toward elevating its global profile, sparking comparisons with China in economic and geopolitical debates.
“Started from the bottom now we’re here”
In 2006, the signing of the India-US civil nuclear cooperation agreement marked a pivotal moment in India's global recognition. Despite stable relations, the deal, facilitated by President George W Bush, set an unprecedented precedent, propelling India onto the international stage.
“The signing of the deal was part of a well thought out strategy by the US. It was to bring India into the centre stage as a pivot to its Asia policy and as a counter to China’s growing clout. The reason to choose India was obvious. The largest democracy. With all its flaws but still a democracy. It’s economy on the rise consistently since it was liberalized in 1991. At the time of signing, India was the 14th largest economy in the ranking of GDP of 195 countries, rising per capita, offering a very large consumer market, housing, retail, infrastructure on growth trajectory, strong currency, large forex.”
The strategic move aimed to position India as a pivot in the US's Asia policy and counter China's influence. With a thriving democracy, a growing economy since 1991 liberalization, and military strength, India emerged as a significant player. However, the global financial crisis in 2008 briefly halted progress, with economic growth slowing. India's swift response, including stimulus packages, restored growth, making it the fastest-growing major economy after China.
Stepping forward a few years now, it’s 2014.
“In 2013, Xi Jinping's election as China's President marked a turning point, with border incursions against India becoming a trend in the following years. However, India underwent a transformative political shift when the Bharatiya Janata Party (BJP) won the 2014 general election, bringing Narendra Modi to power as Prime Minister. Modi's administration immediately adopted an assertive approach, moving from a traditionally non-aligned stance to reactive, proactive and aggressive diplomacy.
In response to Xi's flexing of muscle, Modi's leadership ushered in a new era of Indian foreign policy. The BJP's landslide victory provided a mandate for change, prompting Modi to engage extensively with global leaders through bilateral visits. This marked a departure from India's previous reactive and defensive diplomatic posture. The shift not only signaled India's readiness to respond to regional challenges but also reflected a strategic evolution in navigating global geopolitics.”
💉 Black Swan Event
“Then came the black swan event of the century – the Covid pandemic grinding the world to a halt. Complete lockdown of economies around the world. The reports of the origin and spread of deadly virus from Wuhan in China to the entire world changed the perception of China in the minds of the global community. The over dependence on Chinese supply chain proved costly for world economy which remained severely disrupted for much of next two years. This realization caused governments and businesses around the world to move to a China + 1 strategy for an alternative supply chain.”
This idea of a China + 1 strategy for an alternative supply chain really struck a cord for me. This notion that in order for India to succeed China doesn’t have to fail really feels like an actionable item. Similar to how the Android phone market is still the biggest regardless of Apple’s dominance, India can be the Apple to China’s Android. No matter what Apple will do, the overall market share for phones will always be in the hands of Android due to the amount of different brands using Android OS, similarly no matter what happens with China’s exporting India can always benefit and be the slow mover. The real gem.
It seems to be becoming more and more unpredictable to do business in China, I’m not bearish China but I am definitely weary when it comes to their current problems. Why not pivot to India for your international market exposure? Why not both? $INDA for India and $FXI for China, will make sure that your hands are in both cookie jars. Exposed to both a leading economy and growing middle class like India and a possible revival and comeback story like China.
The fundamental change that Prime Minister Modi brought was shifting the international political discourse and attracting global businesses to increasing look at India as alternative to China.
The first two terms of Modi government worked in financial inclusion, health insurance, electricity, gas, water, roads, toilets, food, houses and digitization. The production-linked incentive (PLI) scheme was a great economic initiative that could transform India into export-oriented manufacturing hub and ideal destination for foreign companies looking for diversifying their production from a china’s increasing draconian rules. The world has also noticed with awe the technology advances India has made, the Unified Payments Interface (UPI) and Open Network for Digital Commerce (ONDC) are gaining global traction.
The PM Gati Shakti Master Plan (Speed with power) for providing multimodal connectivity to various economic zones is transformative. Economic Zones like textile clusters, pharmaceutical clusters, defense corridors, electronic parks, industrial corridors, fishing clusters, agri zones etc. are being mapped for integrated infrastructure planning and make Indian businesses more cost competitive. This will boost economic growth, attract foreign investments while de-risking investments by visualizing the connectivity, and enhance the country’s global competitiveness in export markets.
While China’s economy is slowing down, its population greying, the Indian economy is likely to achieve a growth rate of 7% in FY 2025 after growing at or above 7% in 2023-24, driven by resilient domestic demand despite risks and uncertainties in the global economic landscape. More than 50% of India’s population below the age of 25 and more than 65% below the age of 35. It will continue to have this demographic dividend until 2050.
In next three years, the Indian economy, which is the 5th largest now, is likely to become the 3rd largest. The stock market and banking system are showing robust signs of new life.
The Nifty 50 growing at a compound annual growth rate of 15% almost is pretty impressive over a 5 year period
✍🏽 A Narrative Shift
Recently on February 1st, the interim budget was presented by the finance minister of India. It reflected the governments commitment to accelerate its efforts towards achieving “developed nation” status by 2047. It is remarkable that a big increase in capital outlay by 11% to around 150 billion USD and fund allocation of around 13 billion USD for work opportunities and employment generation has been done while adhering to fiscal discipline. This is more praiseworthy that the fiscal prudence was maintained even though this year being general election year when generally the government resorts reckless splurge on populism. Globally, investors were expecting that. Investors have recognized continued focus on fiscal sanctity, and it is reflected in global interest in doing business with India. India’s stock markets also reflect this enthusiasm. Most notable and talked about last week on the newsletter - India’s markets recently overtook Hong Kong to become the world’s fourth largest with a valuation of $4.33 trillion.
Clearly, there is discernible shift in global narrative of India over China.
To me as a NRI - that’s what we’re called a non resident of India.. way to label me… To me as an NRI - I can see so many events in my recent past that I can point to as being super bullish for India and I just wanted to name a few that I had noticed, probably tons that I missed.
Indian lunar lander Chandrayaan-3 successfully landing on the south side of the moon
Cricket coming to the olympics
India’s first LLM - (large language model for developing AI applications)
Apple shifting production to India (making iPhone 15 there)
Shark Tank India simply existing.
New airports being built throughout the biggest hubs in India
🖼️ The Art Gallery
Charting tools and comprehensive financial data analysis from Koyfin - use link provided to receive 15% off Koyfin Plus
The bottom seems to be no where in sight for the HSI index and there appears to be no ceiling for the SENSEX index. Notable strength
India seems to be breaking out of that long base that it has been making since mid 2021
🗓️ Calendar Clues
Curated from: Trading Economics
Day | Economic Data | Importance |
|---|---|---|
Monday (2/5) | ISM Services PMI | Low |
Monday (2/5) | Fed Bostic Speech | Medium |
Tuesday (2/6) | Fed Mester Speech | Medium |
Wednesday (2/7) | MBA 30-Year Mortgage Rate / Applications | Low |
Wednesday (2/7) | 30-Year Mortgage Rate | Low |
Wednesday (2/7) | Fed Barkin Speech | Medium |
Wednesday (2/7) | Fed Bowman Speech | Medium |
Wednesday (2/7) | 10-Year Note Auction | High |
Thursday (2/8) | Initial Jobless Claims | High |
Thursday (2/8) | Fed Barkin Speech | Medium |
Thursday (2/8) | 30-Year Bond Auction | High |