Whilst investors tend to focus on economic metrics such as GDP growth to measure a country’s progress, an equally effective way to assess the rise of a nation is its success in sports – not just highly commercialized sports like cricket but also more physically strenous disciplines like athletics, wrestling, weightlifting, etc. which require intense training over 10-20 years for very modest financial rewards. India’s rise in such sports highlights major underlying improvements over the past two decades in social development, in access to information and access to opportunities for a broad swathe of people well beyond the urban elite in the big cities

A wind of change — which started to blow at the turn of the 21st century — swept across most sports disciplines. Most categories, like boxing, wrestling, archery, hockey etc. have given us international stars.” – What has led to India’s sporting success (Business Standard), 2022.

“Before even I started (playing badminton) it was more like ‘Girls shouldn’t come out and play sport — you need to stay at home.’ But in a few years back it has changed […] It’s no more that the girl should stay at home….No one should think that men are strong, and women have nothing. Nobody should think that […] Women are strong enough to do whatever they want.”  – P.V. Sindhu (source: How family, fight and fortune fashioned India’s very own sporting ‘Wonder Woman’, CNN,2021)

A steady arc of improvement

India’s performance at the latest edition of the Commonwealth Games in Birmingham is a testimony to the fact that the country’s performance in highly demanding sporting disciplines (beyond cricket) has improved steadily over the past 20 years. From earning less than 25 medals in the Commonwealth Games back in 1998, the medals tally for the country has consistently stayed above the 60 medal mark in the last two decades. In fact, had the organizers in Birmingham not removed shooting-related disciplines from the games, it is likely that India’s medals tally in Birmingham would have represented its best haul in such games. As it happened, India returned from Birmingham with 61 medals.

Interestingly, research on a country’s sporting success and economic development suggest that the former is an indicator of the latter. Research conducted by Den Butter & Van der Tak of the University of Amsterdam showed that the number of medals won at the Olympics had strong correlation with not only the income of the country in GDP terms but also general welfare indicators like Human Development Index (HDI) or Quality Of Life (QOL) index (source: Den Butter, F.A.G., van der Tak, C.M. Olympic medals as an indicator of social welfare. Soc Indic Res 35, 27–37 (1995)).

Given that most Indians tend to live in a perpetual state of angst regarding the softer factors which drive human development, how can we reconcile India’s improving fortunes in sport with the pre-existing view of pessimism about the country like lack of employment, elevated levels of pollution, and so on?

There seem to be broadly three driving forces behind India’s improving performance in sports – social development, economic development, and better access to information.

Social development – the holy trinity of food, health, and education

As Exhibit 1 suggests, India’s development on all three parameters of relevance when it comes to social indicators has been remarkable, especially in terms of the infant mortality rate, where the reduction has been the second only to China’s in the last 10 years. Improvement in these indicators, however, takes time to turn into palpable economic development. As is evident, the achievements of the last 10 years are now starting to bear fruit – and India’s performance in sporting events is just one impact of this change, among many.

Economic development – Improvement in per capita income

Research has shown that a country’s wealth has a large bearing on performance in sports and especially, in Olympics. A study done by Andrew Bernard & Meghan Busse of Dartmouth and UC Berkeley respectively showed that a large population and higher per capita income both played a significant role in generating higher medal tallies for countries in the Olympics (source: Andrew B. Bernard, Meghan R. Busse; Who Wins the Olympic Games: Economic Resources and Medal Totals. The Review of Economics and Statistics 2004; 86 (1): 413–417.).

Pursuant to this line of logic, if we look at the growth in per capita income for India and other countries like China, Japan, South Korea, and USA, it is evident that India’s growth has been respectable over the past decade (China has had the highest growth in per capita income). In fact, India’s increase in per capita income in the last 10-20 years has been stable around the 4-5% per annum mark. By a country mile, the last 20 years has been a strong period for India in terms of per capita income growth. It makes sense therefore that the generation which grew up in the last 20 years is now making its presence felt in global games.

Better access to information – the benefit of a “networked” country

The digital transformation that the country has witnessed, especially in terms of technology and digitization (eg. the coming together of the JAM or Jan Dhan, Aadhar, and Mobile network), has helped integrate India’s vast but dispersed economy. This is evident from exhibit 3, where in the last 5-6 years, the pace of technology adoption in the country has risen astronomically.

As people increasingly use the internet and have access to more information, the information on opportunities in the economy (and sports) will increase too. This democratization of access to information – on the range of sports available for one to participate in, the training facilities available, the coaching & nutrition techniques available – has played a critical role in sportspeople from the hinterland outperforming the entrenched urban elites. For example, fencing as a sport may not be well known in India. However, in the last edition of the Olympics, India competed in the sport. Ditto for lawn bowls in the latest edition of the Commonwealth Games where India returned home with a gold medal and a silver medal.

Implications for investors

There tends to be a lot of breast-beating in India about how badly the country fares of softer factors underpinning economic development. Whilst India can do better on every one of these fronts, the country’s improving fortunes in a range of demanding sports suggests that the underlying social factors driving development are actually showing steady improvement over time. This gradual strengthening of the country on economic, social, and connectivity parameters over the last 10-20 years has now started showing results. The recent success in the Commonwealth Games is just manifestation of the broader winds of change sweeping across this vast land. For those, who are interested in more conventional analyses of India’s rise, we refer you to our 25th June 2022 note, India’s moment after a decade of structural reforms:

After a decade of pathbreaking structural reforms, India is going through a similar phase. Massive improvements in transport & communication networks, in the banking system, in the tax regime and in the way social security benefits are dispensed have allowed enterprising companies to capitalize on these changes and create mouth-wateringly valuable franchises.

Nandita Rajhansa and Saurabh Mukherjea work for Marcellus Investment Managers (www.marcellus.in).

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