Category: Investing

India’s Economy “Picking up Steam” Says S&P

Australian exporters – take another look at India

S&P Global Ratings said that after stalling post the second wave of the Covid pandemic, India retained the country’s BBB-sovereign rating with a stable outlook.

INTO INDIA has urged Australian firms looking for new markets to take another close look at opportunities in India.

S&P said that growth will improve over the July-September quarter, pointing to high-frequency indicators such as goods and services tax receipts and motor vehicle sales. Record forex reserves, and India emerging as an external creditor to the world has also supported the rating and stable outlook, S&P said.

Data released in July showed India’s economy expanded 20.1% year-on-year in the April-June quarter on a low base though sequentially it was down 16.9% over the previous quarter. 

S&P anticipates another Covid wave in India, but with rising vaccination coverage, it expects this to be less severe both in terms of health and economic impact. India’s vaccinations have crossed 700 million and in the first week of September, the daily average has been over 7.6 million doses.

Source THE INDIA EXPERT blog of Gunjan Bagla

CONCLUSION – INTO INDIA asks exporters and investors – if you are not now heavily committed to India, now is the time to take action.

India now chasing trade deals – having resisted for decades

Indian PM Narendra Modi meets recently on trade with former Australian PM Tony Abbott

What has changed for India? It seems that having resisted trade deals for years, it now plans by the end of March 2022, to complete multiple quick-fire bilateral trade agreements.

Something has not changed however – the Indian government, distrustful of full scale FTA’s, is prioritizing “early harvest” pacts over comprehensive free trade agreements.

What has changed is the pandemic and the rise of China.

Therefore, the Indian government is focusing on strengthening the trade with G-7 nations with strong Indo-Pacific strategies and those with growing influence in central Asia such as the United Arab Emirates.

Australia, at a key position in the Indo-Pacific, is a high priority. As a fellow member of the QUAD, India and Australia have never been so close strategically and are keen to add trade now.

In large part, this is India’s push to do well as supply chain realignments take place – there is only a narrow window of opportunity to get these deals done.

How big is this? The government is negotiating bilateral trade agreements with 20 countries and expects to complete half a dozen deals, including those with Australia and Britain by this December and March 2022. 

India is ambitious – Mr. Piyush Goyal has set kept a target of US$ 400 billion for annual merchandise exports – almost 38% higher than US$ 290 billion achieved in last year and plans to achieve US$ 2 trillion annual merchandise exports by the end of this decade.

Outcome? Lots of deals that will not be quite world class Free Trade Agreement (FTA) but which will have some wriggle room.

Deloitte finds US firms investing more in India than in China

INTO INDIA has long called for more western investment into the growth story that is modern India.

Now, according to a survey conducted by multinational professional services network, Deloitte, a large proportion of international business leaders remain confident in India’s short- and long-term prospects and are readying plans to make additional and first-time investments in the country.

The India FDI Opportunity survey of September 2021, which questioned 1,200 business leaders of multinational corporations in the U.S., U.K., Japan, and Singapore, found that India remains an attractive destination for investments, scoring highly for its skilled workforce and prospects for economic growth.

  • 44 percent of the 1,200 business leaders surveyed are planning additional or first-time investments in India
  • Nearly two-thirds of first-time investments will be made within the next two years
  • Business perceptions of India are better in the U.S. and UK compared to Singapore and Japan
  • Recent reforms by the Indian government to improve ease of doing business are popular, but awareness of policy improvements remains low

It also said that more business leaders, especially in Japan, are making investments in India for access to the domestic market rather than using India as a springboard for exports.

“India has the strongest positive perception in the U.S. when compared to markets such as China, Brazil, Mexico, and Vietnam. The U.S. and U.K. business leaders expressed greater confidence in India’s stability,” it said.

Investment is always indirectly but powerfully linked with market entry and trade outcomes. INTO INDIA applauds the enthusiasm of the US for India and hope this is also taken up in Australia – where investment funds are high – fourth largest wealth management market in the world.

New “Business Champions” group to provide much needed top level links between India and Australia

Indian Commerce Minister Mr Piyush Goyal

A new “Business Champions” group will lead top level business engagement between India and Australia – and it was launched last week in India.

INTO INDIA welcomes this move to bring the “top end” of both countries together. Business engagement at this level has not worked well in the past. Most of the business councils and chambers have provided lower level SME engagement – important as this is.

“Supply chains” is behind the enthusiasm of India for the new Australia-India Business Champions Group’s role. Mr. Piyush Goyal, Minister of Commerce & Industry, Consumer Affairs, Food & Public Distribution, Textiles, Government of India said this when addressing the Inaugural Meeting of the Australia India Business Champions.

The Minister is co-chairing the group with Australian Trade Minister, the Hon Dan Tehan.

“The Australia-India Business Champions Group’s key aim is to liberalise and deepen bilateral trade between both the nations and pave the way for collaborative economic growth.” stated Mr. Dan Tehan MP, Minister of Trade, Tourism and Investment, Government of Australia.

Major business organisations leading the group are the Confederation of Indian Industry (CII) and the Business Council of Australia (BCA). Both represent almost all the major business corporations in both countries.

Mr. Chandrajit Banerjee, Director General, CII, pointed to areas such as mining, education, defence, space and emerging sectors which the group can take forward.

Ms. Jennifer Westacott AO, CEO, BCA, highlighted that we must strengthen and reform regional and global institutions, so they deliver for our citizens.  She said the Business Champions would engage directly with the top tier of Australian and Indian Governments on matters critical to business. 

Other panelists at the meeting included H E Mr. Manpreet Vohra, High Commissioner of India to Australia, H E Mr. Barry O’ Farrell AO, High Commissioner of Australia to India, Dr. Anish Shah, MD & CEO, Mahindra & Mahindra Ltd, Ms. Julie Shuttleworth, CEO, FFI, Mr. Rakesh Bharti Mittal, Vice Chairman, Bharti Enterprises, Mr. Mike Cannon-Brookes, Co-Founder and Co-CEO, Atlassian, Mr. Nitish Jain, President, SP Jain School of Global Management, Ms. Verena Lim, Asia CEO, Macquarie Group, Mr. Girish Ramachandran, President, Tata Consultancy Services Asia Pacific, Professor Duncan Maskell, Vice Chancellor, University of Melbourne.

Australian fund investing in India returns 69% in 12 months

Mugunthan Siva is CEO of India Avenue Investment Management

Thinking of investing in India? The India Avenue Equity Fund returned 69.4% over a year August 2020 ending 31 August 2021, outperforming its benchmark (MSCI India in AUD) by 14.4% in the same period.

India Avenue Investment Management (IAIM) is 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. Click here for their website:

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Over the last month the India Avenue portfolio has started increasing exposure to companies leveraged to urban consumption thematics. Given India’s vaccination drive, it is anticipated that close to 100% of India’s urban population above the age of 20 will be vaccinated (currently vaccinating at a pace of more than 10m per day) by the end of 2021.

Recently they have added stocks to the portfolio which are focused on the food delivery model or restaurant chains and fast-food outlets that are likely to benefit from rising propensity to eat out of home. India’s food delivery market is expected to grow from around US$5bn to over US$20bn1 over the next five years. Factors which are propelling online delivery are:

• Changing lifestyles and eating habits, driven by the lack of availability of time and rising

wealth as well as the rising prominence of the change of household structure in cities.

• Rising digitization (internet and smart phone penetration), particularly amongst India’s

significant millennial population.

• Rising urbanisation of India

• Growing working population, particularly amongst young women.

• COVID-19 has propelled the urge to eat prepared food with contactless delivery points introduced by Zomato, McDonalds, Pizza Hut, KFC, Dominoes etc.

The number of times Indians eat out rose from 2-4 times per month in 2010 to 6.6 times by the end of the last decade. Additionally, the average spends of a consumer rose from Rs.1000 to Rs.2500 in a month2

This was especially prevalent amongst India’s millennials in Tier I and Tier II city locations. This trend has been accentuated by food technology, social media and marketing, health, and wellness and as well as the evolution of consumer palates for ethnic diversity in food choice.

INTO INDIA has consistently pointed to the large number of vibrant Tier 1 and Tier 2 cities for trade and investment.

The CEO of IAIM is Mugunthan Siva – Mugunthan.Siva@indiaavenueinvest.com

Business with India? Leave your ego behind and let Indians run the business

Pretty much every western company that has succeeded in India has done so on the support of a strong local Indian team across all levels. To do this, they have effectively left their ego behind.

Those who struggle typically want to transfer their “culture” to India so they put their expat team in charge of the local team. This is ego centred and mostly does not work. These are mainly companies that do not trust the locals and are over-confident about their own “head office culture”.

Being preoccupied with transferring “the way we do things in our company” to India makes them blind to “the way Indians do things there” which is the most important insight for future success.

So – local management teams are essential in India (and probably anywhere you go in Asia) and that team should lead and manage your enterprise throughout India. This does not mean you do not provide the support of some expats – of course good companies do, but this is to empower the local team. Expats can come and go as needed – but your business needs longevity in India and that is what an Indian management team can provide.

Smart companies that go into Asia also ensure they hire Asians into the HO team, so you have Asians running your enterprise on the ground in Asia and Asians at the right level in HO guiding and advising the HO team.

Real access to family and business networks in India (and probably all of Asia) is mostly only achieve by Indians.

Conclusion – if you want to succeed in business in India, rely on Indians to run your Indian business.

Affordability and lack of credit holding back India’s digital economy – but not for long

Nitin Jain is CEO and principal fund manager at Kotak Mahindra Asset Management (Singapore)

While predicting rapid growth, Nitin Jain of Kotak Mahindra Asset Management (Singapore) says there might be one catch – the India digital economy has to overcome one big hurdle – affordability. This is matched by a shortage of consumer credit.

Nitin Jain explains:

With per capita incomes of about $2,000 and large infrastructural challenges, to offer a value proposition at a mass level is extremely challenging, and requires large capital.

2021 has been a breakout year with more than $20bn in funding so far this year and almost $10bn in July 2021 alone. Prior to this the average was just $8bn-$10bn per year.

The future is looking bright for India to become a credit-rich country enabled and backed by data. Fintechs with buy mow pay later (BNPL) businesses will help fuel the data backed credit boom.

With one of the youngest economies with about 1.4 billion people, the highway to growth is long.

India already have more than 100 million users on Amazon, and travel, transport, ed tech, food tech, gaming, SaaS in enterprise and mass, are seeing millions getting added every month.

Traditional businesses tend to grow in an algebraic way, but digital businesses are growing at geometric scale and some potentially at logarithmic scale. 

We as investors are keenly analysing these changes and investing in upcoming opportunities and remain hawk-eyed on potential disruptions.

A vibrant digital ecosystem throws in immense possibilities of large capital coming to India.

Tens of billions have been invested by global investors in Chinese internet businesses and India is at a similar stage and with the recent chaos, potential realignments can accelerate the flows.

Y2K was a watershed moment for India IT services and 20 years later, Covid-19 will likely be a watershed moment for the Indian digital economy.

Indian economy primed for growth – old and new

Nitin Jain CEO and principal fund manager of Kotak Mahindra Asset Management (Singapore)

For investors, India is at a very interesting juncture, according to Nitin Jain of Kotak Mahindra Investment Management.

The old economy is set to make a comeback after a Covid-19 hiatus and the digital economy is primed for hyper growth – perfect combination!

Nitin Jain says: “The latter is becoming more pertinent when we see serious regulatory challenges emanating from the biggest new economy play in the world, China.”

On the day when the China ed-tech companies and other new economy stocks were reeling under the fear of profits being taken away, Zomato, a fast growing Indian food tech company had its listing day gains of more than 50%.

Close on the heels are many other digital businesses which are getting ready for listing.

Indians are already hooked to the internet and now we are seeing transaction-related internet businesses gaining mega scale. 

In fact, around 750 million have access to a mobile payment system tied with the Aadhar card, a biometric card which uniquely identifies an individual and is very easily accessible by any business, government services, and healthcare services securely, seamlessly and at almost no cost.

So – time to review your investment and business/market entry strategies?

Infosys now in the “big four” of Indian companies

Infosys, a global IT firm headquartered in Bengaluru, joins the “big four”

Infosys Ltd this became the fourth Indian firm to reach a market capitalization of US$100 billion.

The IT services company has joined TCS (Tata Consulting Services), Reliance Industries, and HDFC Bank in passing the US$100 billion market value threshold.

Reliance Industries (originally a petroleum business but now diversifying to telecoms and retail) is the most valuable company, valued at US$184.69 billion), followed by Tata Consultancy Services (TCS) at US$181.18 billion and HDFC Bank at US$113.51 billion.

Something else to turn your mind to India – India’s GDP is likely to grow at 18.5% in the April-June quarter this year, according to an SBI report.

India second to China for APAC startups and globally third largest unicorn ecosystem

According to GlobalData, Indian entrepreneurs received US$ 16.9 billion in venture capital investment in 2021, second only to Chinese peers in the Asia-Pacific (APAC) region.

According to GlobalData’s financial transactions database, 828 venture capital financing agreements were reported in India between January and July 2021, with a total declared funding value of US$ 16.9 billion.

Flipkart raised US$ 3.6 billion, Mohalla Tech (ShareChat) raised US$ 502 million, Zomato raised about US$ 500 million, and Think and Learn (Byju’s) raised US$ 460 million in India between January and July 2021.

“While several of the top major countries globally saw a drop in VC financing value in July compared to the previous month, India managed to display growth despite a decline in VC funding transaction volume,” stated Mr. Aurojyoti Bose, Lead Analyst at GlobalData.

India has becoming a digital-first economy as smartphone usage has increased and mobile Internet has become cheaper. As a result, IT firms have benefited the most from this trend.

According to GlobalData, India has the world’s third-largest tech unicorn ecosystem, after only the United States and China. VC investors are showing interest in companies in e-commerce, social media and social networking, food delivery, edtech, and digital payments at the COVID-19 pandemic, according to Mr. Bose.