Rise of India through 10 charts

Hello, fellow Olio enthusiasts! 👋

Happy Hump Day and welcome to the 33rd edition of Weekly Olio - your weekly dose of giggles, wisdom, and a sprinkle of intrigue with our tantalizing thought piece (yes, we're talking about Publisher's Parmesan here). 🤭

A big shoutout to all of you for the fantastic support and feedback. Let's keep the momentum going in the days and weeks ahead! 😊

Today’s Publisher’s Parmesan talks about the rise of India through 10 different charts. These charts tell India’s fascinating story since Independence to emerge as one of the fastest growing democratic economies in the world.

Exciting, right? 👏

Will come to that, but let’s first start with the curation.

Oh, and before you continue, it's time for some sponsor spotlight! Don't worry, it's not clickbait, it's just our way of 'feeling the ad-vantage'. So, do click, and help us keep the lights on and the puns rolling! 😀

This edition of Weekly Olio is brought to you by Growth Daily.

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The Short Read 📝

Does your company have an India strategy?- by Harvard Business Review

The valuation ratios of Indian branches of multinational corporations are significantly higher than those of their parent companies. This indicates that the subsidiaries have promising prospects for expansion, which is reasonable considering the rapid growth of India's middle class.

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The Long Read 📜

Motorola ditched cell phones and found a lucrative second act - by Fortune

Motorola once dominated cell phones, but in the past few years, it has become a huge player in public safety—one of the hottest areas in tech.

Brown's approach has proven successful for Motorola, as evidenced by their increasing sales, soaring earnings, and rising stock prices. Investors have taken notice of these achievements, leading to a nearly 150% surge in Motorola's shares over the past five years. This growth has outperformed prominent tech stocks like Alphabet and Amazon, and it has even surpassed the rise of the Nasdaq Composite index during the same period.

Nevertheless, Motorola faces significant risks due to the nature of its rapidly expanding business, which intersects with contentious issues such as privacy, gun violence, and police brutality. For example, the company was involved in a lawsuit alongside a gun manufacturer, school district, and others, filed by Uvalde parents following a school shooting. The parents claimed that Motorola's equipment failed the town's first responders during the incident, although Motorola asserts that the lawsuit lacks merit.

This week’s Publisher Parmesan is sponsored by The Motley Fool.

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Publisher’s Parmesan 🧀

Rise of India through 10 charts

Napoleon once said - ‘Let China sleep, for when she wakes, she will shake the world’. The economic, political and industrial landscape of the earth has changed irrevocably in the last three decades with China’s meteoric rise. India now finds itself in a state not too different from China’s 30 years ago.

With a projected GDP growth rate between 5.9% and 6.5%, India is set to be the fastest-growing economy in the whole world. While global stock markets have struggled with rising interest rates, the Indian stock market is touching all-time highs. There is a democratically elected stable Government along with a young, aspiring population. If you go by the prevailing narrative, the stage is now set for India to replicate or even exceed what China has achieved in the last 30 years.

The next 10 charts help lay down the foundation for this growth. India has been changing dramatically over the last 50 years. Few people understand the growth and the underlying drivers. This post is meant to provide a starting point.

1️⃣ Life expectancy

While India’s economic growth gets the maximum press, there have been massive strides in human development. The single biggest marker is life expectancy. From less than 40 years at the time of Independence to more than 70 years in 2021 - there has been a significant shift. Several initiatives around healthcare, vaccination, and reducing infant mortality have played a role in this transformation. While a lot still needs to be done especially around healthcare in rural areas, this is a clear sign of progress.

2️⃣ Literacy Rate

At the time of Independence in 1947, India was a poor country with very little infrastructure to support education. Post Independence, investment in education was prioritised at all levels. As a result, the literacy rate has jumped from less than 20% in 1947 to almost 70%+ in 2011. In addition to grass-roots education, India invested early in technical and management education to build its next generation of leaders.

3️⃣ Share of people living on less than $1 per day

The one area where India has made significant progress is the reduction in extreme poverty. Despite a growing population, the share of people living on less than $1 per day has come down from more than 10% in the 70s to less than 1% in 2019. As the Indian economy continues to grow, this number is likely to come down further. Technology has been a major driver with Aadhar-enabled bank transfer of subsidies plugging supply-side leakages.

4️⃣ Growth of Sensex

As a result of India’s rapid economic growth in the last few years and the continued expectation of fast growth, the stock market is touching new highs every few days. With more Indians participating in markets and more Indian companies becoming global players, this rally will only continue.

The Bombay Stock Exchange - India’s oldest stock exchange published the following infographic on its 50th anniversary. It traces the journey of the Sensex - the flagship index of BSE.

5️⃣ Exports of goods and services

At the time of Independence, India contributed almost 2% to global exports. From 1947 onwards, India’s share of global exports fell as multiple Governments adopted inward-looking policies and shunned global trade. To be fair, infrastructure to grow was largely absent in an agriculture-dominated economy. As a result, India’s share in global exports fell to just about 0.5%.

However, 1991 was a pivotal year for the Indian economy. With liberalisation reforms, global trade was welcome once again. Large global companies were free to come in and ply their trade. Large Indian companies like Reliance Industries were also raring to establish their presence in markets across the world. The Y2K bug in 2000 laid the foundation for the export of IT/Technology services making India the epicentre of the global outsourcing boom. Since then, multiple rounds of reforms have integrated India into the global trade ecosystem. While services have led the charge for growing India’s exports, the Government is now pushing manufacturing to establish India as a factory for the world.

Despite all the push, India’s share of global exports is still less than 3% - for comparison, China’s share is 15%. As more initiatives take shape, this number is poised to grow.

6️⃣ Number of Internet Users

With almost 600M internet users, India is one of the largest internet economies on earth. It is expected that these 600M users will eventually move a larger chunk of their spending online. This massive user base represents a big opportunity pool and is expected to drive India’s growth. The rapid increase in the number of users has allowed the Indian startup ecosystem to take root with millions of people coming online to buy products, invest in stocks or open bank accounts.

Almost 40% of the Indian population is online - primarily via smartphones and feature phones. The pivotal moment for internet adoption in India was the launch of 4G services by Jio - they offered free services for an extended period of time to drive the adoption of their services. This triggered a pricing war between operators bringing down the cost of data dramatically.

Today, India has one of the cheapest mobile data in the world. Everything from online shopping to online classes for competitive exams is available on smartphones throughout the length and breadth of India.

7️⃣ Share of adults with bank accounts

For most Indians, having a bank account was a luxury. With most banks run by the Government, getting an account was not a straightforward process. All of this changed with the launch of Aadhar and the famed India Stack. A Government initiative called JAM - Jan Dhan, Aadhar and Mobile was launched in 2014-15. It helped increase the number of bank accounts exponentially.

Driven by technology and a savvy banking regulator, the process of opening bank accounts was simplified. From a 2-3 day process, bank account opening became a 15-minute process. Today, you can open an account in any bank sitting at home using just your Aadhar-linked mobile phone. As a result, the share of adults with bank accounts has jumped drastically from less than 40% to almost 80%. As per BIS estimates, what India did for financial inclusion in 9 years, would have taken more than 47 years by traditional means 🤯

As more Indians have opened bank accounts, the Indian banking sector has understandably done well. Deposits in Indian banks have crossed $2T - doubling in just six years.

Despite the increasing penetration of bank accounts, a large majority of Indians still remain outside the formal credit system - relying on an informal network of moneylenders and landlords. A lot more still needs to be done.

8️⃣ Number of UPI transactions

One area where India is already standing head and shoulders above everybody else is digital payments. India is a global leader in real-time payments led by its homegrown system called Unified Payments Interface built on top of Aadhar - the unified identity platform. UPI adoption has grown at a scorching pace. In FY22, UPI payments were worth 86% of India’s GDP volume. This rapid adoption has been backed by an ever-increasing number of Internet and smartphone users.

Even God had to learn how to accept donations via UPI in India!

9️⃣ Participation in Indian stock markets

In order to participate in the Indian stock markets, every individual needs to have an account with a depository through a brokerage. These accounts are called demat accounts. In the last 10 years, the total number of Demat accounts has almost tripled. As the Indian markets have rallied, more and more retail investors have joined the market ditching traditional savings tools like gold, real estate and fixed deposits. As the Indian market continues to perform, the shift from traditional assets to financial assets is only going to accelerate.

The role of technology in this transition cannot be overlooked. India has one of the most technologically advanced market participants and a tech-savvy regulator. In addition, high-quality consumer-facing apps have made investing in stocks/ mutual funds super simple.

🔟 Funding in Indian startups

In the last 10 years, India has become a favourite destination for global fund managers with over $38B being pumped into Indian startups in FY22 alone. Today, India boasts of the world’s third largest startup ecosystem - behind the US and China. Most top global funds have an India team and an India strategy. As of 31 May 2023, India was home to more than 100 unicorns. As the economy grows and per capita incomes go up, the Indian startup ecosystem will continue to shine bright.

These graphs highlight the significant change that is underway in India. Massive changes are happening in every section of the economy. As these changes compound, the next century could truly be India’s. From an investor’s perspective, India is an adventure that is just getting started.

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