Why Invest In India? The Overview – another economic America.

English: Map of the British Indian Empire from...
Image via Wikipedia
English: UK India Business Council logo
Image via Wikipedia

Never before has any country outside the US had as many of its corporate leaders in the Forbes Rich List top 10 as India has today. Not even Japan in its heyday or China matches the feat. To make the case for opportunities in India would seem self-evident then. After all, if a nation’s own people, who know the country the best, can make fortunes to compete with the world’s largest economy, then surely outside investors too can do very well there. Yet, misperception still obstructs many investment decisions concerning India. Let’s eradicate them.

The walking does the talking

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?

Of course there are obstacles. But again, consider the American century just passed. As President Obama put it on winning the Presidential election in 2008 when describing an American lady of 106 years of age:

“She was born just a generation past slavery; a time when there were no cars on the road or planes in the sky; when someone like her couldn’t vote for two reasons – because she was a woman and because of the color of her skin.

At a time when women’s voices were silenced and their hopes dismissed, she lived to see them stand up and speak out and reach for the ballot.

When there was despair in the dust bowl and depression across the land, she saw a nation conquer fear itself with a New Deal, new jobs and a new sense of common purpose.

When the bombs fell on our harbor and tyranny threatened the world, she was there to witness a generation rise to greatness and a democracy was saved.

She was there for the buses in Montgomery, the hoses in Birmingham, a bridge in Selma, and a preacher from Atlanta who told a people that “We Shall Overcome.”

A man touched down on the moon, a wall came down in Berlin, a world was connected by our own science and imagination. And this year, in this election, she touched her finger to a screen, and cast her vote.”

Has India not overcome similar obstacles? So does an investor not see the same extraordinary spirit of perseverance needed of a peoples if one is to invest in their nation?

If America could overcome its challenges to become a superpower, then India’s challenges appear no more great. Consider Obama’s speech then from an Indian perspective, it may read thus:

“Imagine a lady in India who this year turns 100. She was born under British imperial rule; a time when there were no cars on the road or planes in the sky; when someone like her couldn’t vote for one reason – there was no vote – for any Indian.

And tonight, think about all that she’s seen throughout her century in India — the heartache and the hope; the struggle and the progress;

At a time when Indian voices were silenced and their hopes dismissed, she lived to see them stand up and speak out and reach out and take back their motherland.

When there was desperation as a nation tore itself apart and a million died; she saw a nation conquer fear itself with a sense of common purpose.

When women and children were massacred in the Punjab by a British General, and tyranny looked insurmountable, she was there to witness a generation rise to greatness and the largest democracy in the history of the world created.

She was there during the massacres, the poverty, the pillaging, religious battles, when her countrymen went around the world to save the World during a World War, and a man of non-violence from Gujarat said as his dying words “Hai Ram”.

And this year, she saw a space vehicle blast off towards the moon from her beloved India.”

Surpassing then the US in the last century; in terms of returns, in terms of the spirit of the peoples.

The obstacles are not truly Indian, but those of other nations knowing how to leverage the opportunities. Take SMEs in the UK. Thanks to the energetic UK Trade and Investment providing access and know-how on exporting from the UK into India, or the vitality of the UK India Business Council providing a soft-landing in India, SME access to India has become easier. If SMEs from Britain do not come out to India to become more productive and tap growth, then competitors from around the world will swarm upon the weakest British companies and through corporate Darwinism extinct them. The obstacles are not in India, but in the exporting or investor country, knowing how to leverage the opporuntities.

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.

Little wonder then this nation had the greatest GDP of any country on the eve of the formation of the British East India Company. There is nothing to suggest her people will not return to resume their destiny.

The Author is founding Principal of Praefinium Partners, an Asset Management company investing in India; a former Financial Times columnist with over 200 columns published in the paper and has had published 13 investment books. He is a former Visiting Fellow in Business & Industry, Corpus Christi College, Oxford University and a non-practicing barrister, Board Member of the UK India Business Council and UKTI Global Entrepreneur Programme ‘Dealmaker’ for India.


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s