At this juncture, when we at TVS Capital Funds, attempt to unravel our journey to India@75, we vividly recall the words of our Member of our first Board, Shri C.K.Prahlad, whose vision inspired us to empower next gen entrepreneurs. When asked to speak in the year 2007 on the occasion of celebration of India@60, he rightly positioned his vision1 to speak on “Power of India@75”2. We dedicate this blog in rememberance to our mentor Shri C.K.Prahlad.
India’s first prime minister declared during independence in 1947, “Long years ago we made a tryst with destiny, and now the time comes when we shall redeem our pledge, not wholly or in full measure, but very substantially.”
On the eve of the completion of its 75th Anniversary of Independence, India is renewing that pledge even as it has made rapid strides from a modest, diffident country to cement its rightful place among the top leading global economies. The tailwinds of decades of economic reforms, a macro-policy framework, a large, skilled workforce, and visionary entrepreneurs and great business houses have laid the foundation on which pillars of economic growth and social development have been built.
There has been great progress on many fronts be it economic or social to raise the standards of living of its people by investing in new opportunities, economic development and expansion, particularly in the transformation of India in the last three decades. Much of that is evident in India’s global standing of high repute in several industries.
Global scalers
Perhaps some of the best examples of its progress over the several decades can be seen in the pioneering industries that have become global behemoths in their own right. India has become the world’s largest manufacturer of generic drugs providing much-needed pills across the world. India has become the technology backbone of the world exporting services of nearly $200 billion.
India is the second largest producer of food and agriculture, the second largest user of mobile phones, the fifth largest auto market in the world, and the second largest two-wheeler market. Much of these advancements in such economic clout were unimaginable decades ago when India was grappling with poverty, hunger and low capital investments.
Of course, much of India’s economic growth has come post-1991, when India benefitted greatly from new and bold reforms and the growth in the global economy. The reforms unleashed the true potential of India which was grappling with poor rates of growth during the first half of independent India. The country showed high rates of growth with global investments pouring in, new entrepreneurial prowess being unleased, and the demographic dividend paying huge dividends.
Wave of fortune
High investments, a growing consumer base have also aided the growth of the Indian economy. Over the last few decades, India has grown into a strong economy ranking fifth in the world at nearly $3.5 trillion according to the IMF. In the 1950s and early 60s, India’s GDP stood at about $35 billion. The country has also lifted millions of people out of poverty. Its GDP per capita increased from around $100 in the 1960s to $2183 in 2021.
India’s capital markets, the barometer shows that despite the odds and the ups and downs of the economy, the Sensex has grown at 14% annual growth since 1991, when the per capita income stood at about $300. This shows that the country has overcome well from the blip for about three decades post-independence.
India @ 100
As we look into the crystal ball, India is in a unique position to cement its growth and become one of the largest growing economies by 2050. With the economic policies in place, it has overcome the stifling economic performance of the first three-four decades since independence. The country will rank among the top three economies in the world in nominal GDP from the fifth rank at present. Note that India ranked as the ninth largest economy in 2010, hence the growth is remarkable. India is already one of the fastest growing economies in the world, and it stands to achieve its $5 trillion GDP ambition in the next few years. But the GDP growth in the next two decades will be phenomenal.
India has many economic advantages and growth opportunities. With a vast supply of low-cost and skilled labour, it is slowly becoming another alternative in the world of manufacturing next only to China. India’s financial markets ecosystem is highly advanced, and capital market participants such as hedge funds, venture capital funds, mutual funds and brokerages, insurance players and large family offices and its investors have already laid the foundations for a promising future.
But more significantly the growth of India’s tech-enabled digital ecosystem that encompasses banking, financial services, fintech, payments, digital transactions, and new-age manufacturing that allows businesses to reduce cost, improve service deliveries, underpins the rapid progress in the last few decades, thus promising a brighter and more participative growth for all stakeholders of the economy.
Roaring for growth
Investors large and small have the opportunity to seize this inflexion point, because the next few decades will transform India with massive wealth-creating opportunities. Technology-led changes have permeated every aspect of the economic world whether it is healthcare, telecommunications, rural economics, manufacturing, financial services, fintech, consumer products, and so on.
There is also a huge potential in sectors such as infrastructure, travel and tourism, aviation, defence and entertainment. Over the last few years, the government has also launched several initiatives such as the production-linked incentive scheme to promote investments and unleash the power of India’s low-cost manufacturing base.
Research and development in new products, services and delivery standards led by technology are ever-increasing. We have seen the value of the new era of digital solutions and automation that helped the global economy navigate the storm caused by the pandemic that helped companies function and deliver services to their customers.
To fuel the next decades of India’s socio-economic advancement, more capital investments particularly in cutting-edge technology, data-driven predictive models, artificial intelligence-driven product development, and new-age manufacturing continues to remain increasingly in demand. Governments and businesses will have to adapt to new technology trends faster to build competitive edges whether it is technology or products to continue to deliver growth.
Larger companies are being driven out by smaller, nimble technologically advanced companies, which necessitates more investments in technology, product and market development which is restricted not only in India but across the globe.
The coming decades will provide more inclusive growth opportunities across the socio-economic strata. This requires inculcating an innovative culture and a capital market ecosystem that encourages innovation, and growth. It will also need Indian investors to create new business models and innovative financing that will drive future economic growth.
The investors paradise
Indian capital markets are well-positioned to show strong growth and expansion in the coming decades. Many start-ups and new-age tech-driven companies have already become behemoths in the capital markets over the past decade or so. Yet, the coming years will prove to be more exciting and promising. Big conglomerates are buying over start-ups and rapidly looking to scale them higher.
But over the next decade, more importantly, there will be a large number of product-driven innovative companies that will go from idea and conception to listing. In fact, the Indian capital market has expanded at a phenomenal pace over the last three decades from a total market capitalisation of Rs 1.8 trillion in 1992 to Rs 27.5 trillion in August 2022 with 5244 companies listed on the BSE. But the future promises to be even more exciting. The sheer number of start-ups technologically driven
There are a large number of technology and product companies waiting in the wings to get listed, and new companies and start-ups continue to get funded at a phenomenal pace.
It’s not only the foreign capital, but the availability of large amounts of domestic capital as well that will drive India forward. The difference between foreign and Indian capital is that domestic capital is far more discerning in terms of the businesses it backs and the value that can be created. No doubt, many companies may not be able to make it to the listing stage, and there will be crashes and fold-ups. But many new companies will stake make it and create enormous value for all stakeholders, mainly investors.
The Sensex will more than double well within the next decade, even at the current growth rates. But with more digital platforms coming to the market, India’s capital markets could achieve that level even faster. The future promises to be exciting, and we are excited that it’s just the beginning of a wonderful journey. We are more excited for investors who have the greatest opportunity to lead this transformational journey from the frontlines.
Shri C.K.Prahlad, did mentioned then, that freedom fighters of India@75 are entrepreneurs who can bestow the nation with real social and economic freedom. At TVS Capital Funds, we strive to empower next gen entrepreneurs in their quest, beyond their resources, to make India@100, a $20 trillion economy.
1 https://www.businesstoday.in/magazine/in-this-issue/story/prahalads-plan-128570-2008-08-06
2https://www.dnaindia.com/business/report-india-at-75-a-vision-by-c-k-prahalad-1165990