Over the past couple of years we have written not just about the structural changes in India which are allowing high quality companies to consistently growth their cashflows (see https://marcellus.in/blogs/three-distinct-layers-of-polarization-in-the-indian-stock-market/) but also how China has repeatedly scored own goals which have hammered the ability of Chinese companies to compound their shareholders’ wealth (see https://marcellus.in/blogs/why-india-beats-china-hollow-on-consistent-compounding/).
As you would expect, we are not the only people who have noticed these developments – the team at The Economist has also taken note of India’s rise. In their cover story titled “India’s Moment”, The Economist says: “…a novel confluence of forces stands to transform India’s economy over the next decade, improving the lives of 1.4bn people and changing the balance of power in Asia. Technological leaps, the energy transition and geopolitical shifts are creating new opportunities—and new tools to fix intractable problems….As the country emerges from the pandemic, however, a new pattern of growth is visible. It is unlike anything you have seen before. An indigenous tech effort is key. As the cost of technology has dropped, India has rolled out a national “tech stack”: a set of state-sponsored digital services that link ordinary Indians with an electronic identity, payments and tax systems, and bank accounts. The rapid adoption of these platforms is forcing a vast, inefficient, informal cash economy into the 21st century. It has turbocharged the world’s third-largest startup scene after America’s and China’s.” (Click here for The Economist’s editorial piece on India: https://www.economist.com/leaders/2022/05/13/the-indian-economy-is-being-rewired-the-opportunity-is-immense).
In the same issue which features the aforementioned editorial, The Economist features a detailed story about the changes afoot in India and why courtesy these changes, India is likely to be the world’s fastest growing large economy for several years to come. Most of these changes will be familiar to Marcellus’ clients eg. the creation of an integrated national market thanks to better roads, airports and broadband. However, The Economist’s detailed story also highlights a couple of facets of India’s development which we in Marcellus hadn’t clocked on to.
The first is the rise of the ‘India Stack’, an interconnected set of technologies created by successive Indian governments over the past decade. The India stack includes Aadhar, the payments system that is UPI (things that all of us now take for granted in India but things that most of the developed world does NOT have) and the hundreds of millions of bank accounts created at the PM’s behest in 2015 as part of the Jan Dhan program. The impact of the India Stack is far reaching and for that alone The Economist’s detailed story is worth reading. Not only is the India stack encouraging thousands of startups to create products and services which disrupt the old way of doing things, it is also allowing the Indian Government to pump more than $50bn of welfare and subsidy payments every year directly into the bank accounts of recipients (thus cutting out the rent seeking middleman). This construct has given India a social security safety net.
The second interesting change that The Economist highlights is the energy transition in India – from traditional fossil fuels to batteries and hydrogen. “There is a renewable-energy investment spree: India ranks third for solar installations and is pioneering green hydrogen….Mukesh Ambani of Reliance says he will cut the price of green hydrogen to $1 per kilogram by 2030, for instance, from about $5 today. Tata is rolling out battery plants, electric vehicles and semiconductors. These are huge, risky bets\ that few other firms would dare take.”
If you don’t get a chance to read The Economist’s story, you might want to listen to Shekhar Gupta’s 15 minute broadcast on the story – https://www.economist.com/leaders/2022/05/13/the-indian-economy-is-being-rewired-the-opportunity-is-immense

If you want to read our other published material, please visit https://marcellus.in/blog/

Note: the above material is neither investment research, nor financial advice. Marcellus does not seek payment for or business from this publication in any shape or form. Marcellus Investment Managers is regulated by the Securities and Exchange Board of India as a provider of Portfolio Management Services. Marcellus Investment Managers is also regulated in the United States as an Investment Advisor.

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