India Continues Its Steady March Towards Holistic Growth
My first article in BW (19 November 2022) was titled ‘India Continues to March Ahead’, in which I wrote about ‘share in Global Market Cap, 5G launch, flattering endorsements by Global Biggies, increasing GST collection, surging auto sales and mobile phones production, push on infrastructure and green energy etc. – all indicators of robust economic growth. Since then I have been writing mostly on Sustainability and Inclusivity. For the 13 January 2024 issue I did revert to the India Story but with a twist – focus on the ‘soft aspects’ like sports and life values, sports making inroads into small towns and villages and PwDs taking big leaps in the same, in short, progress at societal level which is equally important for any nation’s holistic growth. This time, after 16 months, I am reverting to hard facts about industry and business; how India is taking centre stage on the global high table and becoming increasingly relevant to all.
The interim Union Budget 2024-25 clearly shows the direction in which we are moving. Most of the announcements point to continuing efforts towards empowerment of all sections of society. Emphasis on infrastructure boost in smaller cities is a great step for ‘widely distributing’ growth that should also help slow down the regular migration from villages to metros and deflect some of it to smaller cities. The scheme for setting up a Rs 1 lakh crore (LC) corpus for pushing entrepreneurship in new-age technologies – including AI, 5G, Quantum computing, Health and Agri-tech – would be a big leap towards holistic growth.
Steps like the 10,000 crore allocation for rooftop solar installation for one crore families will boost our decarbonisation agenda and also improve the lives of the underprivileged. The decision to withdraw petty tax demands is also good to help the lower middle class and allow taxation departments to focus on the big evaders. Increasing PLI amount should give a fillip to more industry sectors. Increased Capex plan is of course, a vital move with cascading effect on industry as a whole and creation of new jobs.
Let me start with the recent World Economic Forum at Davos – the ‘go to place’ for the biggest industrialists, professionals and trade ministers who make this annual pilgrimage to the scenic and freezing town in Switzerland for networking and initiating eye popping deals for investment and joint ventures. The Indian Squad mid-January included Chandrashekharan, Sunil Mittal, Gautam Adani, Sajjan Jindal, Rishad Premji, Sanjiv Bajaj, Union minister for Railways Ashwini Vaishnaw and the Reserve Bank of India (RBI) Governor Shaktikanta Das. Global big ones – whom they would’ve interacted with – Nadella, Altman, Krishna of IBM, Ruth Porat, CFO Alphabet and many others.
And, here are some comments: KKR chief Henry Kravis “the world is astounded about how India is supremely confident and growing at 7%+”; he also shared his immediate plans “from 2009 to 2014, our total investment in India was only $10B whereas we are looking at the next 10B coming in very fast”. Klaus Schwab, Founder and Executive Chairman of WEF added (to Kravis’s point) in a recent article “while rest of the world is struggling with pessimism due to geo-political hostilities, sluggish economies and crisis management”. In the same tone as the KKR chief, Bain Capital’s Asia Head chipped in with a more precise time frame “we will invest $10B over the next 3-5 years”.
Let me quote what our own indomitable telecom czar Sunil Mittal had to say when questioned about how ‘India was the flavour of the forum’, “It is no more about ‘selling’ the India Story, it is all about listening to us about the opportunities we have to offer”. Similar sentiments were expressed by the Colgate-Palmolive Chairman Noel Wallace during an ‘earnings call’ – his focus being on the spurt in rural demand. Starbucks CEO Laxman Narasimhan, told newspapers at his ancestral home in Pune, “Returning to India, after taking over as CEO of Starbucks, has allowed me a ring-side experience of the rapid transformation India has undergone. The infra development here, booming consumer base and widespread adaptation of technology translate to a prime opportunity for bolstering our business here”.
Chairman of the big US PE firm, Advent, told the Press in Mumbai on 7 February, “Recent geo-political issues have made India more attractive as an opportunity for global investment”; His co-chair added, “your country has a very talented workforce from a technology point of view”. French company Teleperformance’s CEO Julien made an even more flattering comment, “India is a cornerstone of our global expansion”; this BPM biggie plans to add 60,000 employees to their rolls in India over the next three years. Perhaps the most interesting comment came from Prem Watsa, Chairman Fairfax – the $84 billion Canada-based investment giant, “India’s big advantage lies in the fact that it’s two-thirds economy is consumer oriented”; Fairfax plans to double its present investment in India ($7 billion) within the next five years. Government sources expect almost $100 billion FDI annually over the next few years.
FDI Flows and Investment
Back home, regular flow of commitments for investment and tie ups with global majors continues. Let me first touch semiconductor chips – that need enormous sums of FDI and where I see light at the end of the tunnel! Micron’s Sanjay Mehrotra mentioned early in January that their $2.75 billion memory chips plant at Sanand Gujarat, in partnership with the Tatas, is expected to start production early in 2025. In December, Tower of Israel – the world’s seventh largest chip maker – submitted a revised proposal to set up a 65 nm and 40 nm chip fabrication unit in India. There are plans to modernise – at a cost of $2 billion – our own old SCL plant at Mohali. Currently it can make only 180 nm chips whereas the world has moved to 10nm. Incidentally SCL started manufacturing chips way back in 1984 – three years before the world’s number one TSMC, with an eye popping annual revenue of $17 billion. (Incidentally, Samsung, the second biggest, does a distant 3.5 billion). Global revenue of chip makers is about 28 billion, so TSMC is clearly the king. Following the Tatas, HCL is reported to be tying up with Foxconn for chip manufacture; they plan to invest $37 million to set up a chip packaging and testing factory.
One keeps getting good news about Apple’s phone production plants moving from China to India in small tranches. Foxconn – their largest contract manufacturer – with their present mobile phones revenue in India nudging $10 billion is likely to jack it up significantly. Wistron has made a deal to sell their Karnataka plant to Tata Electronics – making the Tatas the first Indian company to make iPhones. On another front, we are set to kick off three mega defence production projects worth Rs 1.4 lakh crore. The projects include an aircraft carrier, Tejas jets and Prachand choppers. Good news continues to pour in on the travel front. With the big boom in the numbers that travel by air, Akasa – our youngest airline – has placed orders for 150 Boeings. Air India and Indigo already have gigantic orders for 700 new aircraft from Airbus.
To make India a major hub for civil aviation, Tata and Airbus are teaming up to make helicopters for civilian use and Thales of France will set up an MRO (Maintenance, Repair and Overhaul) unit. There’s robust progress on the agro and horticulture front too. Food grains production rose four per cent over the 2021-22 figure of about 350 million tonnes. Horticulture produce increased by one per cent (five million tonnes). A notable item was the big jump in Kashmir saffron price to Rs 3.25 lakh/kg, making it a hot market for buyers from the US, Canada and Europe. This saffron which is the only one to get a GI tag, should pose a challenge to the products from tradional sources like Spain, Iran and Afghanistan.
There are several other hopeful signs too. Goods and Services Tax (GST) collections continue to be on the rise. As per the CBIC chairman FY2024-25 should see an average monthly inflow of Rs 1.7 lakh crore. News about the proposed sale of Brookfield’s 1.6 GW clean energy assets in India (out of their total inventory of 20 GW) at an enterprise value of $1-1.2 billion translates to a pricing @ 70 cents per peak watt which is lower than the current fossil energy figure of over one dollar. Granted that these are old assets, it is nevertheless a very attractive cost for anyone looking at setting up solar farms. Despite all criticism by the Opposition, our newly renovated ‘Religious Hotspots’ – Ayodhya, Golden Temple, Hardwar, Jagannath Puri, Mathura-Brindaban, Rishikesh, Tirupati, Ujjain, Vaishno Devi and Varanasi – may well attract lots of tourists – both domestic and international – perhaps surpassing the traditional Delhi-Agra-Jaipur golden triangle. People visit these pilgrimage centres for both happy and sad occasions, so demand is constant. Lot of infrastructure upgradation is already happening in all these cities and more, including hotel proposals by big chains that are in the pipeline.
Having mentioned many signs of hope, inevitably there are huge challenges too. First, there are the geo-political issues – Russia-Ukraine war, Israel- Hamas conflict, Houthis’ attacks in the Red Sea affecting transit of oil tankers. Disasters caused by Climate Change and lack of inclusivity. Considering that our per capita GDP is just $2,300 (under Rs 2 lakh) CEO compensations touching Rs 100 crores or more are an avoidable provocation and a sore thumb in society. It hurts to read that our rank on the per capita income index is a shameful 139 in the world. A well-known economist recently said that ‘post covid high end goods have seen faster growth whereas there’s dip in case of lower end ones’. Notwithstanding many forward steps in the area of chip manufacture – and the Indian chip market expected to be around $100 billion (Rs 8.25 lakh crore) as well as availability of Rs 2.3 lakh crore worth of incentives to position India as the global hub for electronics manufacturing, our progress is just not fast enough in this very complex, very long gestation, very high cost sector monopolised by TSMC and just a few others.
In the case of the automobile industry – our pride – let’s not forget that imported cars attract 125 per cent customs duty and so our indigenous production has huge protection and, as Arvind Panagariya recently wrote, “it is not standing on its own four wheels”! Latest ASER (annual status of education) report shows a poor picture of education in rural areas. There is unabated rise in road deaths; student suicides and serious crimes like rape and murder. A large proportion of our society is yet to mature in any significant manner and that can happen only with a thorough overhaul of a holistic education system. Of course, our public health infrastructure too needs major upgradation.
Author is member national advisory board Sarthak, president NAAI and trustee Climate Project Foundation. He is past president of AIMA and member BOG IIMC
