Financial Voice

Alpesh Patel Tuesday 30th April 2019 06:19 EDT

Dear Financial Voice Reader,

As the Indian election is underway, I looked back over the last decade, not last 5 years, at what I had written about India. Almost exactly to the day, 10 years ago, I wrote some of these. You judge – has India lived up to the promise?

“Meeting a California Silicon Valley billionaire who has re-emigrated back to India is perhaps one of the more striking proofs of India’s potential. These, the most successful of Indians, who moved to the US in the 1960s from an opportunity-shorn India, return today with their millionaire colleagues, to capture the types of opportunities few, if any places on earth can match. After, all, no other major capitalist economy will even come close to matching India’s growth for decades.

Imagine a business person with a time machine. They would probably choose to go back to the beginning of last century to the US to make their fortune – the time of Rockefeller and Getty.

Consider during that century, the Dow advanced from 66 to 11,497. This gain, though it appears huge, shrinks to 5.3% when compounded annually. And that nevertheless was the American century – the century when the US became a super power. Consider that that growth rate transformed a backward nation from the horse and carriage to one which freely sent man to the moon. Yet India today exceeds and is projected to exceed for our working life times that return-rate of 5%. The baton of Rockefeller and Getty is truly carried by Ambani and Tata.

If your investment options were binary: US, the world’s largest economy, or India, think now about this century. For investors to merely match that 5.3% market-value gain, the Dow – recently below 10,000 – would need to close at about 2,000,000 on December 31, 2099. We are nearly a decade into this century, and we have racked up none of the 1,990,000 Dow points the market needed to travel in this hundred years to equal the 5.3% of the last.

Whereas, India, with the real economy targeting 8% for the foreseeable future is far more likely to provide the types of returns to match the transformation the United States had since 1900. Where would you invest?

To describe India in statistics would be to describe the Taj Mahal by its dimensions; you can do it, but it denies any beauty. But if you want statistics, consider theses:

India has among the higher returns on foreign investment than China according to the US Department of Commerce. By 2032 India will be one of the three largest economies in the world. Indeed today on purchasing power parity it already is the third largest economy in the world and one quarter the size of the US economy. With 300m consumers and the world’s largest pool of English speaking scientists and engineers. A place where 75million phone subscribers annually, 8 million TV sets are sold annually. By 2015 over 63 million households are expected to have income over $30,000 in PPP terms.

India, although the seventh largest country in the world, has the second largest area of arable land in the world – it feeds the world – as the world’s largest producer of milk, sugarcane and tea and the second largest producer of fruit, wheat, rice, vegetables. Comparisons to the US are obvious. An economic superpower needs not just persevering and innovative peoples, but abundant natural resources and an openness to the capitalist ideal – India, like the US of last century, fits the bill.

Investment needs the assurance of heritage. And for investors in India, lies more than any country a heritage of innovation. After all this was the land of medicine and astronomy before the Greeks, navigation before the Romans. Their number system allowed the rest of the world to count. Or as Dan Sheinman of Cisco put it, ‘ We came to India for the costs, stayed for the quality and are now investing for innovation.’ Indeed one fifth of Fortune 500 companies have set up R&D centres in India and India is among only 6 countries in the world to have satellite launch capabilities.”

So, you tell me? Happy?

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