These India numbers will boggle your mind but the future is more exciting

Here are some India and Australia numbers to contemplate:

(Thanks to Bill Cole, Partner International, BDO, pictured below, for some of this data)

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AUSTRALIA

  • Population: 24.6 million
  • GDP: USD 1.3 trillion
  • Top 5 Imports: Personal travel services, motor vehicles, refined petroleum and ships
  • Top 5 Exports: Iron ore, Coal, Education travel services, natural gas and personal travel services

INDIA

  • Population: 1.339 billion
  • GDP: USD 2.5 trillion
  • Top 5 Imports: Petroleum products, gems, electronics, chemicals and machinery
  • Top 5 Exports: Textiles, Gems, Chemicals, Products and Agricultural products

Top Trading Partners

Australia’s top 3 trading partners are China, Japan and the USA.

India comes in at number 7.

India’s top trading partners are China, USA and UAE, with Australia coming in at number 20.

So, what about the future?

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Australia’s India Economic Strategy to 2035 Report:

  • Recommends that by 2035 Australia lift India into our top three export markets, make India the third largest destination in Asia for Australian outward investment and bring India into the inner circle of Australia’s strategic partnerships
  • Identifies 10 sectors where strengths of Australian businesses match India’s needs:
    • Education (flagship)
    • Agribusiness, resources and tourism (lead)
    • Energy, health, infrastructure, financial services, sport, science and innovation (promising)

It is sure a “big picture” report – but with the right approach it can be achieved.

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Seems PM Modi and PM Morrison are getting on well – so time for business, investment and education to pick up the baton and run with India. Ready?

Where to from here for the Coronavirus and India investments?

Where to from here for India?

India Avenue Investment Management – an Australian fund for India – has issued advice regarding the impact of the Coronavirus on investing in India. Here are some highlights:

As we have always articulated to investors, India is a market where you should build exposure during dire times as the structural story will outlast any cyclical events.

It’s a matter of portfolio construction and investment horizon. When it comes to satellite investments like investing in India, investors typically tend to sell during adversity and buy during euphoria.

As a business we seek to improve this experience for our investors by providing our insights of activity on the ground in India.

Globally markets around the world peaked on February 20th, 2020 and since then have fallen roughly 20% in local currency terms (S&P500). Currencies have also been moving around in a volatile fashion.

In India, markets have fallen approximately the same amount.

However, a corporate tax cut, bank recoveries, improving GST collections and a pick-up in PMI’s indicated most positive news was on the way in FY21 (India’s financial year is April-March).

The Coronavirus won’t stop India’s structural growth resuming its path at some point in FY21, however, it will impact global growth in at least the first half of 2020 and therefore India’s growth.

Whilst India doesn’t have significant links to the global supply chain (exports are only 11% of GDP), it benefits when global growth is strong given comparative advantages in exports of refined petrochemicals/oils, gems/precious stones, textiles, electronics, pharmaceuticals and automobiles.

However, the key risk for India is the virus making itself a home amongst India’s significant population of 1.3bn and the potential for it to spread quickly, without appropriate healthcare systems and medication for all.

We cannot estimate what the damage will be to markets, but we see the following positives: • Central Bank potential to cut cash rates significantly from the current 5.15% • US$475bn of forex reserves to defend the currency if required • A substantial fall in the oil price which will reduce inflationary pressures in India (India imports over 80% of its oil usage) • Fiscal stimulus likely to be forth coming • Potential to replace China in certain aspects of the global supply chain, given most are now seeking diversity of supply.

For those who have invested in our Fund, the next week or two (which we expect will see heightened panic amongst investors), will be a good time to add some further funds as India is well positioned to rebound as it often does from adversity.

However, how much bravery you have will determine when you invest!

It is not very often that you can identify an investment where you can buy quality growth stocks at P/E’s in the teens and cyclical growth for single digit P/E’s in a market like India. We are re-aligning our Fund to go overweight in the both these segments.

Thanks to India Avenue Investment Management for the above insights

Melbourne and Victoria leading the way on India growth story

My home town is leading big time on engagement with India.

Michelle Wade, Commissioner to South Asia, State Government of Victoria, Australia, outlined some of the facts in a recent speech to a BDO event “India – it’s time to diversify”.

Melbourne and Victoria are dominant in Indian student numbers, we have close on 180,000 Victorians who were born in India plus on tourism we lead the way.

According to Michelle Wade, trade and investment opportunities abound for us in India – including advanced technologies, edtech, health and wellness.

One key to doing well is to drill down and find organisations with the right capabilities, according to Wade.

BTW Victoria has business offices in Mumbai and Bengaluru – and have been very helpful to me.

Which Victorians are doing well in India? A few from the big list – Linfox, Deakin University, Rubicon Water, MedSurge, Monash University and Swisse.

Time you engaged with the India growth story?

Melbourne seminar on India has best expert panel

BDO has assembled Melbourne’s best India panel to speak on Tuesday 3 March – book now – free event. Email michaelm@eastwestadvisers.net

They have a great line-up of speakers:
Michelle Wade, Victorian Trade Commissioner for India, Bengaluru
Susan Coles, Deputy State Director, Victoria, Department of Foreign Affairs and Trade
Bill Cole, Partner International, BDO
Sandeep Khurana, Director, EastWest Advisers
Michael Moignard, Director, EastWest Advisers

I am proud to be the MC of this one.

Venue: BDO, 727 Collins Street Melbourne
Date: Tuesday 3 March 2020
Time: 12 noon start (lunch will be provided)
Email michaelm@eastwestadvisers.net

Pictured below: Bill Cole, Partner International, BDO

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7 strategies for India market entry 2020

  1. Find the affluent millennials

India is home to the world’s largest population of millennials—typically defined as those aged 18-35. At 450 million, these millennials are influencing the way Indians eat, shop, commute and buy, much like their global counterparts. They are the first upwardly mobile group in recent history of India – and will have an impact very like the way western baby boomers changed most things.

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According to Santosh Desai, managing director of Indian Brand Advisory Group Futurebrands, Indians used to be “born something” but now can “become something”.

  1. Drill down to the real middle-class market

We know India has 1.3 billion people, but if you think too much about this you will get nowhere. Drill down to find your market.

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For example, some estimate the “middle class” as high as 300 million. For me, this is way too high. Austrade takes a dimmer view – it estimates that there are approximately 30 – 80 million people in our target demographic, many of whom live outside Tier 1 cities. That’s a big range from 30 to 80, which shows that we just do not know. But for me Austrade’s numbers are too low.

Austrade looks for consumers that:

  1. can afford international travel to destinations, like Australia;
  2. can afford to send their children for study abroad; and
  3. can afford to eat at high-end restaurants and hotels or eat significant amounts of imported food and wine at home
  1. Think of India as many markets

Thinking of India as “one market” will slow down your impact and waste your marketing efforts. First, there is the divide between north, south, east and west. Then there are big metropolises (8-10) and hundreds of tier two cities (around one million plus). Then there are over 26 different languages, multiple food cultures, differing beliefs and interests. It is complex, so build that into your “many markets” strategy.

  1. Consumerism is changing in India

India had just 9 Shopping Malls in 2007. There are over 350 Shopping Malls in 2019. Plus 85 new Shopping Malls will be built in the next 5 years = 435 Shopping Malls in 2025.

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Add to this that online retail is taking off, with Amazon and the local Flipkart leading the way – Indian consumers use cell phones for online access.

Dr Mark Morley Trade Commissioner India Government of Australia makes a key point about opportunities for us: “Australia is well positioned with the Indian consumer. Across India, we have a great reputation for clean, safe and reliable supply. We are well known as a premium supplier of produce, and we have a global reputation for our quality brands.”

  1. Thinking local is a good way to start

Especially for those in food, beverages, education and fashion, your beginnings for India can start right here in Australia.

About 650,000 Australians claim Indian ancestry, and we have over 65,000 Indian students here, which means a significant local market spending money. Add to that the growth in Indian tourists – up to over 300,000 per year and growing at around 15%. This gives you a good market testing opportunity.

  1. Collaboration is the new relationship

If you just want to “sell” to India, sharpen your pencil and think short term – sooner rather than later, India will find an alternative to you.

To be in India for the long term, seek genuine opportunities to collaborate with Indians – once you and Indian collaborators are working together, your future is more secure. This is how Indians prefer to operate, so drop “transactional” thinking and focus on “collaboration” – it is the new relationship.

  1. Give India the time it needs

Cultures based on relationship (collaboration) are slower to move, so give India at least three years. You might “sell” sooner, but for most this is a very short-term market entry approach.

 

India FY20-21 Union Budget

Commentary by India Avenue India Avenue Investment Management (IAIM) – a boutique investment company focused on providing investment solutions for clients in Australia and New Zealand who seek exposure to India’s growth potential through its capital markets. The India Avenue Equity Fund is managed by the team at IAIM and has a bias towards companies which are experiencing strong growth through rising local demand.

The Government of India (GoI) is currently stuck in a dilemma between managing a challenging economic environment (slow growth, rising inflation and weak tax revenues) whilst maintaining fiscal prudence. Hence it was of little surprise to us that whilst the budget continued with its infrastructure push, simplification of the personal tax regime for middle income taxpayers and improvising ease of doing business, to a large extent their hands were tied.

This is evident from the fact that the Budget off balance sheet funding has grown 8% over FY20. Having said that, we expect that spending will likely pick up significantly in FY21 (April 2020-March 2021). Below are some of the key aspects of this year’s budget.

Fiscal Deficit

GoI raised the FY20 fiscal deficit target to 3.8% of GDP from 3.3% set earlier. The fiscal deficit target for FY21 was set at 3.5% of GDP.

Disinvestment

GoI raised the divestment target to INR 2.1tn (USD 29bn), more than double the previous year’s target of INR 1.05tn (USD 15.2bn). Privatisation examples include a few big ticket SOE’s like Bharat Petroleum Corporation Limited and a stake sale via an IPO of India’s largest life insurance player, Life Insurance Corporation of India.

Taxation

A 100% tax break was offered for sovereign wealth funds for investment in infrastructure. A reduced tax rate of 15% for new power generation investment. Removal of dividend distribution tax at the hands of the company and charging it in the hands of shareholders at their individual rates (particularly beneficial to foreign companies as they are subject to a withholding tax of merely 5-10%).

Infrastructure

The GoI continues to emphasise infrastructure as its key development focus. Key areas include building 100 more airports by 2024, development of 9,000kms of economic corridors, 2,000kms of coastal roads connecting ports and 2,000 kms of strategic highways.

Measures to attract foreign capital

Proposal to increase foreign portfolio investor limits in corporate bonds from 9% to 15%. Tax exemptions for Sovereign Wealth Funds fulfilling certain conditions, for dividends, interest and long-term capital gains arising from a debt or equity investment made in India.

Our View

The slowing economy and the Government’s current constraints to spend its way out of the slowdown remains a concern. This had led to a large dichotomy in returns with investors seeking “safety” in Large cap names. Names outside the top-15 have fallen significantly and priced in this concern over the last 2 years whilst India’s mega caps reach all time high prices and valuations. We emphasise that India is a not simply a beta story, as the country rapidly changes, typical of an emerging market country. India today will look markedly different in 5 years’ time and astute investors need to be ahead of the curve to fully participate in India’s ascent to the 3rd largest economy by 2025.

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Commentary by India Avenue Investment Management (IAIM)

How Indian use of English can show cultural differences among English speaking nations

A recent headline in the Economic Times read: “India budget – what all has the Government promised”.

For western English speakers, the “what all” demonstrates a slight difference in how English is used in India. I am not saying anyone is right or wrong here, but language can remind us that although we might speak English, we think first as a westerner or an Indian or other part of Asia. Western media would say “what has the government…”

At the least it is entertaining – at most it provides cultural insights.

At functions in India you will see two signs “Veg and non-veg”. This shows how important food choices are over there.

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Pictured is the vegetarian Jumbo King Food outlet in Mumbai

Young Indians will often refer to non-relative individuals as “Auntie” or “Uncle” as a sign of affection.

“Timepass’ is a terrific Indian-English creation – used to describe a Bollywood movie or TV show that was just OK. How was the movie – Oh you know, timepass.

When an Indian talks about “mugging” it is generally not about thugs or criminals – it describes rote learning, memorising, cramming.

In a crowded country, “kindly adjust” is a common phrase which means “sorry about any inconvenience but there is not much I can do about it now”. Especially useful on trains.

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Pictured is Ahmedabad station where “kindly adjust’ comes in handy

Conversations can often include “rest is fine” which comes after a short description of what is happening in your life and “rest is fine” is an all purpose summary of the rest.

“What is your good name” is one I love – such a respectful way to ask a person’s name.

Brian Johnston recently wrote in this topic in Traveller.

He said a simple sign in a Delhi temple said “Ill manner of all kinds is intolerable”. Admonishment or observation? Intolerable, but is it tolerated?

Indians, he says, have a Shakespearean knack for new variations of words – upgradation, pin-drop silence, and “Mention not!” when you offer praise.

More – she is pulling your legs. Pay attention on. Discuss about. She’ll be knowing the answer.

How about “Don’t prepone it – do the needful!” By the way, “Prepone” is much shorter than “”Do you want to bring our meeting forward a day?” Prepone is now in the Oxford English dictionary.

Words such as hullabaloo, hoary, gallivanting, thrice and scurrilous continue to thrive in India.

Johnston says: “Indian English conforms to its own proper rules of grammar and vocabulary”.

He makes the point that English is no longer controlled by the small number who originally spoke it. Native speakers of English (450 million) are way outnumbered by non-native speakers (at least 1 billion).

In India you can order “hot hot coffee”. A travel guide might refer to the wonderful India Gate in Delhi as “big and enormous” – that is huge!

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(I am pictured in November in front of the “big and enormous” India Gate in Delhi)

China of course has its own English, often dispensing with subjects (can or can not!) or verbs (this chilly crab delicious).

India and China both use “is it” in questions – “you are leaving now, is it?”

On the road in India is entertaining – “Horn please!” is the instruction on mountain bends and on the back of trucks. “Faster will see disaster” it a beautiful use of English as is “Always alert, accident avert”. Also – “Road is hilly, don’t be silly”

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Pictured above – colourful back end of a truck in India

My favourite is the sign off used in emails and letters – “We will revert with the necessary”. Says it all.

(Thanks in part to Brian Johnston and Traveller 1 February 2020)

India budget revives “Modinomics”

Has “Modinomics” been given a boost by the Indian budget?

A couple of highlights from the recent Indian budget make me think the PM Narendra Modi might have found his economic mojo again.

Here’s one – 100 more airports will be developed by 2024 – that is a big number!

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Pictured above – Mumbai and Delhi airports

The Union Minister for Finance & Corporate Affairs, Smt Nirmala Sitharaman, while presenting the Union Budget 2020-21 in Parliament said that infrastructure was crucial to the theme of “Economic development” and hence the Budget is dedicated to providing “Ease of Living” to all citizens.

Here’s another – Indian Sea Ports will receive funding for technology to improve their performance and the government is considering corporatizing at least one major port and subsequently listing on the stock exchanges.

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Here’s a third example – a national gas grid, expanding to 27,000 km plus states to introduce “Smart Meters” plus a corporate tax rate of 15 per cent for new domestic companies generating electricity.

Just my quick take on the budget, which seems to have found the Modi economic mojo again.

Online food consumers fastest growing sector in India

In the next two years, the Indian food-tech industry is expected to reach the US$8 billion mark, according to a report by Google and Boston Consulting Group (BCG).

The food tech space has been the fastest growing e-commerce segment in terms of reach and engagement, on the back of the rapid advancement in internet adoption and continued investments on consumer trials and delivery satisfaction.

According to the report, titled ‘Demystifying the online food consumer’, the major reasons for growth in the use of online food ordering apps includes a large variety of cuisines, good discounts and convenience.

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It said, “In fact, once users are satisfied with the service and start becoming habitual, they become more discerning about value – this behaviour is observable independent of town, class, social status, age and gender.”

Food tech is now in more than 500 cities in India.

Mr Rachit Mathur, MD and Partner, India Lead of BCG’s Consumer & Retail Practice added, “Overall online spending in India is rising rapidly and expected to grow at 25 per cent over the next five years to reach over US$ 130 billion.

“Riding on the wave of rapid digitization and steadily growing consumption, the reach of food-tech companies has grown six times over the last couple of years and will continue to increase further.”

The report is based on feedback of about 1,500 respondents across 12 cities.

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Delhi-Mumbai expressway part of transformation of Indian highways

By 2023, Indians will be able to drive on the world-class Delhi-Mumbai expressway which will also be one of India’s longest expressways. The trip is estimated at 12 hours (we almost took that long from the Taj Mahal in Agra to Delhi!)

Expressways are major projects of the Modi Government.

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In the next three years, the Modi government is planning to build three of 22 expressways and green corridors. A total of 22 new expressways and green corridors will be built by FY25. This is change on a massive scale.

Once completed, the total length of the Delhi-Mumbai expressway will be 1,320 km.

How long now (before the expressway) to drive from Delhi to Mumbai?

Officials estimate at least 24 hours, but I think that is wildly optimistic.

In other words, this infrastructure upgrade will make a huge difference to India.