There is a noticeable shift in how people view India.
I got the chance to meet with some of the top policymakers, think tanks, and investors last week as part of the World Bank's annual Fall Meetings 2022.
After thirty years of observing and participating in these sessions, this time they were pleasantly different. In the past, the first thing to do when one entered into a meeting with a senior investor was to persuade them of the India story, and the second was to listen to their China story.
Most meetings this period began with the phrase "Oh, there is one bright spot on the map!" Being recognised as a country that matters was in fact reassuring. When I think back on how we got here, I believe that our nation has made an effort to set itself apart in the following ways:
First, increasing the productivity of our economy has become our main priority. We have a history of having a low productivity economy. We have recently used digitalization to considerably boost productivity. Examples of the crucial areas include:
- In less than ten years, ecommerce has accounted for over 10% of all retail sales.
- Artificial intelligence use is anticipated to increase agricultural output by at least 15%.
- We are trying to cut the expenses of logistics, which make up around 5% of our GDP, by about half by implementing various technological solutions.
- The effectiveness of the healthcare system has increased thanks to telemedicine and consultation.
- The use of technology in manufacturing has reduced machine downtime by 30% and increased labour productivity by 15%.
When I met investors, most of them were familiar with our digital story; in fact, most of the meetings began with it.
The commitment to economic restraint shown by our government comes in second. We are all aware of how critical managing inflation is to our country. The policy of inflation targeting was instituted by the present administration to control inflation. Since the introduction of inflation targeting, the average rate of inflation has only been 4.8%. And that includes the challenging Covid period, which witnessed significant supply chain interruptions.
Our manufacturing policy comes in third. We concentrated on marketing ourselves as China +1, as many multinational corporations wanted to move 20 to 30% of their manufacturing out of China. However, we are now prepared for "minus China" in several industries and are not just looking to seize the China +1 opportunity. We are ready to serve as an alternative location because we are aware that some players want to fully leave China.
The commitment of the government to end shortages is the fourth. Again, historically, people have referred to us as a nation that lacks capital. We were unable to modernise or increase our output due to a lack of funding. But today, we don't have a shortage of capital. Just as an example, all 19 private companies in the 30-company Sensex had free cash flow levels of under two times net debt, totaling about $25 billion. There is also an abundance of both public and private capital. The investment cycle will be triggered, and productivity will increase.
The startup ecosystem has started to contribute to the economy, which brings us to our fifth and last point. Nearly one million direct jobs and several indirect jobs have been produced by our 76,000 startups. They have improved efficiency across a number of industries, enabled ease of doing business, and finally produced shareholder value and attracted foreign investment.
The effects of Quantitative Tightening (QT) in 2013 and 2022 differ significantly. Even though other major currencies had strengthened against the dollar during QT 2013, the rupee fell by 24%. When we fast-forward to 2022, the inflation, currency, and fiscal situations all seem to be under control. Despite the dollar's appreciation versus the majority of other currencies, this time the rupee's depreciation has been more rational, gradual, and comparative modest.