September 14, 2018
In June this year at the London Business School, the Chairman and Managing Director of Egypt’s Commercial International Bank anticipated his Regulator’s response to any attempt to pursue the Blockchain strategies he and others (rightly) believe to be key to the future of international banking: the Regulator, he smiled, would shoot him. Hisham Al Arab is no stranger to firearms, having fronted down an armed contingent of workers in his banking hall in the aftermath of the Arab Spring, but it’s unlikely he would take any such threat from the Regulator seriously. But he was right to highlight the significance of regulatory drag as a key feature of emergent Blockchain technologies, and also right to look across admiringly at burgeoning technology markets in India, which are rapidly making the subcontinent the Blockchain capital of the world.
All of which might seem a little odd given the Reserve Bank of India announced on 6th April this year that the subcontinent’s Banks should stop offering services to crypto exchanges and crypto related businesses. That, however, was merely a strident coda to last year’s demonetization policy and on closer analysis the directive was always going to be more of a pause than a full stop. Since the Union Budget was delivered in April, India has made huge strides to becoming a world leader in Blockchain technologies and no Government (or Central Bank for that matter) can afford to ignore this practical reality. Mr Al Arab was right to be envious.
And of course Blockchain technologies have profound implications for Central Banks too as they strive to remain relevant in a digital world. The Reserve Bank has since adopted a much more nuanced and structured acceptance of digital business platforms and, crucially, their regulation all of which is helping bring to fruition Prime Minister Modi’s vision of a digital subcontinent: what is now being characterised as the Internet of Value.
For example, the Modi Government is currently backing an initiative using Blockchain technology to manage its own agricultural subsidy programme. The National Institute for Transforming India, an influential Policy Think Tank on the subcontinent, has now signed an MOU with Narmada Valley Fertilizers that will both improve the efficiency of distribution of resources in this hugely important sector and also improve transparency of the overall subsidy process. That has been made possible through Blockchain technology.
And hard on the heels of this announcement Telangana’s Technology and Electronics Department also last week signed an agreement to launch India’s first Blockchain District: structured specially to incubate start ups in the sector as well as developing a variety of strategies designed to resolve market issues including future regulation. Telangana’s IT Minister wasn’t coy in expressing the scale of his ambition: “It is a huge step in reskilling the future. Blockchain experts will be our crown jewels, working together to make India the Blockchain Capital of the World”.
And as a still further example, more than 24,000 farmers in Guntur have bartered their land as part of an initiative by the newly formed state of Andhra Pradesh to pool 53,000 acres for construction of a new capital city at Amaravati: the whole complicated process is based on Blockchain technologies which are streamlining every stage of the transfer process, circumventing the existing creaking system of paper based land registration. The new digitised registry also reduces the risk or malevolent intervention and increases transparency. It would not be possible without Blockchain.
So a lot has changed since April. The Government, far from distancing itself from the technological economy, is now fully embracing the required changes and putting its full weight behind India’s Blockchain revolution…and it won’t need a gun to get its way.
I think we were all a little surprised at the Central Bank’s announcement in April this year, delivered shortly after similar comments were made by the Minister of Finance as part of the Union Budget debate (no surprise there), but as the article rightly points out this was not so much a policy imperative as a straw in the wind. The Minister and the Bank were in truth putting down a tough marker on their resistance to crypto markets becoming an outlet for money laundering after demonetization, and quite rightly so. But neither Government nor Bank can afford to ignore the importance of the Blockchain sector.
Events since April have proved that they haven’t in the slightest ignored its importance.
With initiative after initiative now being actively supported and indeed promoted by the Modi Government, there is every reason to believe India will indeed become the Blockchain capital of the world. Blockchain technologies are steadily and irreversibly being placed at the heart of the subcontinent’s powerhouse economy.
As I have said before, there is no doubt that the key innovations Blockchain has to offer will fundamentally change the way that we all do business in the future and I’m very proud that Red Ribbon will now play a part in that process. As the article rightly says, India is now at the forefront of key developments in the Blockchain and Crypto Currency sectors and I want our investors to be able to share in the exciting opportunity that offers.
August 16, 2018
Inflation, as it happens, is also attracting considerable attention not only on the Monetary Policy Committee of the Bank of England but also at the Reserve Bank of India which anticipated recent events in Threadneedle Street by raising its own interest rate to 6.5%. That came hard on the heels of a hike of 0.25% in June, which was the first rate increase on the subcontinent for more than four years. And given the two Central Banks now appear to be moving in ever closer lockstep on the issue, it’s no surprise that the smart money in the City is on Urjit Patel to replace Mark Carney as Governor when the first overseas national to hold the position returns home next year to spend more time with his money. Urjit Patel is currently Governor of the Reserve Bank and his own three-year term ends next July. Mark Carney’s time is up next June, so If nothing else, it looks like good timing.
And should Urjit Patel eventually end up in the hot seat he could do worse than draw some lessons from the underlying reasons that are driving inflationary growth in India at the moment, which stand in stark contrast to those troubling the former mother country. As a seasoned economist he might also remind himself of the old adage that there is no inflation in a graveyard: consumer demand can only fuel inflation if consumers have something to spend.
The UK’s headline inflation rate of 2.4% is barely driven by consumer spending at all for the simple reason that domestic consumers have very little surplus income to spend. Such pressure as there is on that front is driven rather by the biggest rise in UK consumer borrowing since the global financial crash of 2008. Of much greater importance is the increased cost of imported goods due to a weakened sterling coupled with (inevitably) ongoing fears over Brexit, so the decision to raise rates last week had much more to do with bolstering the value of sterling going forward (although, in the light of market movements in the aftermath of the announcement, that may itself be something of a triumph of hope over experience).
Now lets take a look at India.
Last’s week’s 0.25% rate rise on the subcontinent was primarily a response to rising crude oil prices on international markets. India has spent 12% more on imported oil since April this year, reflecting an upward pressure in key prices and, to a certain extent, a 3% depreciation in the value of the rupee against the dollar over the same period (dollars being, of course, the lingua franca of oil). But that’s nothing in itself to be worried about because there’s a reason why India is buying all this extra oil: it is (quite literally) fuelling the economic expansion which is now expected to see India’s GDP grow by 7.25% this year; and with limited reserves of its own the subcontinent is bound to be vulnerable to adverse price movements on global markets. That is a necessary cost of its startling economic success.
And as for the other element of the inflation equation, we hardly need reminding of India’s unprecedented surge in consumer demand. With the fastest growing population on the planet, an increasingly younger demographic and steadily rising rates of average income, very little of this is leveraged with debt (unlike the UK) but India’s annual consumer inflation rate still hit 5% in June (the eighth month in a row that it has exceeded the 4% medium term inflation target). But again, that is hardly a cause for significant concern either, bearing in mind that the RBI target has an upper tolerance of 6%, which is above the current inflation return. After all, there’s no inflation in a graveyard.
So unlike the Bank of England, the Reserve Bank of India (although pursuing a similar monetary policy) has in reality simply trimmed its inflation projections rather than run scared of them, confident in the knowledge that it is not only still working within existing tolerances but also harnessing unprecedented economic growth. That’s why it has been able to maintain its well-rehearsed policy of neutrality: encouraging growth and keeping inflation under control. Urjit Patel might not be able to take that particular policy with him if he comes to London next year.
Red Ribbon Asset Management has placed India at the heart of its investment strategies since the company was founded more than a decade ago, and nobody understands the subcontinent’s potential for growth better than Red Ribbon. With an unrivalled knowledge of market conditions on the subcontinent, the Red Ribbon Private Equity Fund offers a unique opportunity to share in the potential of the fastest growing large economy in the world.
I had heard that Urjit Patel was being tipped to take over as Governor of the Bank of England when Mark Carney moves on next year, and for my part I think he would be an excellent choice. Certainly it would be a matter of great pride for every Indian to see him take the helm and build on his policy experience on the subcontinent, perhaps even (as the article points out) adding some of the subcontinent’s current economic sparkle to the UK economy.
And it is also interesting to note the radically different reasons for the Central Banks in each country making virtually the same monetary policy announcements in virtually the same week. Inflation is not always an enemy of sound economic growth, and in India’s case it seems rather to be an inevitable product of its own success. As the article says, there’s no inflation in a graveyard.
August 16, 2018
How do you spot a Private Equity Investor at the Opera? He’s the one scouring the lobby for the best exit.
You’ve probably heard that one before. Its an old joke but still speaks to a fundamental truth about all private equity strategies: whilst looking resolutely to the long term (often more than ten years ahead), as soon as the initial investment is made Private Equity Investors will also be searching for the best exit strategy, and in today’s markets that usually means an IPO or a Merger. So next time you’re welling up with emotion at Turendot, keep an eye out for anyone scribbling one or other of those magic words in their programme: they’ll probably be managing a Private Equity Fund.
And given India is now the best performing Private Equity market in the world, it should come as no surprise to learn that the subcontinent is also at the cutting edge of the latest and most innovative of these long term exit strategies.
Take, for example, the Platform Acquisition model: not in itself a novelty, but now being given a fresh lease of life in India. In its new guise the strategy focuses on selected market quadrants and brings them together to create synergies for a targeted return as opposed to more traditional growth through capital infusions into the platform company itself. Think Indian IT and the subcontinent’s burgeoning consumer market, then think Flipkart and you’ll get the idea. Its an intelligent version of the old fashioned roll up strategy where multiple small companies in the same or complementary sectors are acquired or merged prior to being rolled up for exit, and in its new format it has made Private Equity a real force for consolidation and growth within the Indian economy.
Warburg, Pincus and KKR have all launched Platform Acquisition models for projects on the subcontinent, with chosen sectors including business services, media, hotels and hospitality all of which are, of course, already high growth areas. Mid market hospitality in particular is going through something of a renaissance at the moment with this year’s IPO of Lemon Tree Hotels being oversubscribed by a factor of 1.19 and Eco Hotels continuing to make strong inroads into the environmentally friendly segment. Everstone has a Food Services Platform following its acquisition of Modern Foods through which it has subsequently gobbled up Cookie Man; and Goldman Sachs, never slow to spot a trend, has a new Business Services Platform on the subcontinent, appropriately named First Meridian and focusing on HR and staffing companies for later roll up. Sutra HR had better be watching their backs…
Head of M&A at EY India, Ajay Aroa sums it all up nicely: “ The platform acquisitions and their roll ups have made private equity investors the main consolidation force in a number of India’s high growth sectors, standing to benefit equally from growth as well as multiple arbitrage”.
That last point is also interesting (and incontrovertibly right): smaller aggregated acquisitions, characteristic of those completed through a Platform Acquisition model, are very often delivered at a comparatively low exit multiple, giving the platform owner an enhanced arbitrage opportunity. Bearing in mind Blackstone’s private equity investments in India have delivered annualised returns of 30% since 2011, PE Platform Investors will usually lift the aggregate multiple by leverage or arbitrage (or both) in order to compete… and at the moment they’re competing very well indeed.
Red Ribbon Asset Management has placed India at the heart of its investment strategies since the company was founded more than a decade ago, and nobody understands the subcontinent’s potential for growth better than Red Ribbon. Benefiting from an unrivalled knowledge of local conditions and more than a hundred local advisers reporting from some of India’s fastest growing markets, the Red Ribbon Private Equity Fund offers a unique opportunity to share in that potential.
As any Private Equity investor will tell you, nothing is more important than having a clear and deliverable exit strategy, set out in detail at the earliest opportunity. Especially so as most funds will look to lock their investors in for an extended period, often for as long as ten years so that investors need to have a clear understanding from the outset of just how they will exit the fund to secure an optimal return on their investment. That used to be an issue in India where traditional family run companies were resistant to exit by private sale, but the subcontinent’s modern markets have now made the task a lot easier through the increased efficiency of IPO and M&A mechanisms: now, as the article points out, the two most favoured modes of exit for Indian companies.
I’m not surprised, either, to hear of the innovations currently taking place in the subcontinent’s private equity sector. After all India is the fastest growing Private Equity market in the world and it would be surprising if it should prove resistant to the innovative policies being rolled out elsewhere in the economy. You only need to look at the participants involved (KKR, Goldman Sachs and Blackstone) to get a feel for the underlying strength of the sector.
And of course I’m proud too that the Red Ribbon Private Equity Fund is part of this process. We will always be looking for the most exciting opportunities India’s markets have to offer, using the most innovative strategies available so as to deliver the best above market rate returns for our investors.
August 16, 2018
English Law requires an Auditor to be a guard dog not a bloodhound, and that’s why Carillion collapsed in a Multi-Billion Pound insolvency with KPMG’s partners left wondering how to spend their bonuses while they wait to give evidence the House of Commons Finance Committee. But as with so much else over recent years, India’s Government is marching resolutely out of step with the former mother country: intent on improving matters by introducing stronger new audit regime and in the words of Finance Minister P.P. Chaudhary, strengthening the “fabric of corporate governance”. It seems India won’t have its Carillion moment.
The new National Financial Reporting Authority was set up in March with a brief to provide independent oversight of the audit profession and to “…investigate chartered accountants and their firms” (a wide brief on any basis) while doggedly digging into the conduct of even the largest listed and unlisted companies. In advance of the new Agency formally coming on stream, the Ministry of Finance served thousands of notices to companies thought to be falling short on minimum compliance thresholds, going so far as to deregister those who weren’t cooperating. In its sheer audacity the new initiative brings to mind the innovation and overarching ambition of Demonetisation.
There has in consequence been a marked uptick in auditor resignations: thirty so far in 2018, which is double the number for both full years 2016 and 2017 and clear evidence that the new initiative has teeth.
And as if that wasn’t enough, The Securities and Exchange Board of India (SEBI) is also getting in on the act: recently barring Price Waterhouse, Bengaluru from certifying company accounts for three years. Interestingly, it also mandated payment of penalties for wrongful gains (audit fees in other words). KPMG’s Carillion Partners might wish to count their blessings they weren’t working in Mumbai.
The emergence of this tougher regulatory climate is the best possible news for the Indian Economy, which has historically been dogged with horror stories of lax or minimal oversight. Businesses investing into the subcontinent simply cannot afford that level of uncertainty, and this at heart is the fundamental fact behind the reform programme. India’s rapidly growing economy needs a resilient regulatory structure and the innovations now on foot not only go to meeting that objective, they are likely to be the envy of many developed economies too.
Perhaps the new climate is best summed up by the Chairman of EY: “There is heightened risk awareness now with much more effective external regulators. The new focus on governance has driven up the risk perception in the eyes of auditors and made them much more compliant in their approach.”
Exactly so…we don’t need another Carillion in Kolkata.
Nobody understands the fundamentals of the Indian economy better than Red Ribbon Asset Management, which has placed the subcontinent at the heart of its investment strategies since the company was founded more than a decade ago. Drawing on an unrivaled knowledge of local markets with an expert team of more than a hundred advisers working in India’s economic hot spots, the Red Ribbon Private Equity Fund offers unique opportunities to share in the potential of this, the fastest growing large economy on the planet.
Red Ribbon has been specialising in India’s Markets since the company was founded more than a decade ago, bringing an unparalleled expertise to its investment policies on the subcontinent with specialist sectoral advisers working from it’s Head Office in London in conjunction with more than a hundred local experts on the ground in the subcontinent itself. And by drawing on that body of expertise The Red Ribbon Private Equity Fund now offers an opportunity to secure above market rate returns in this, the fastest growing large economy in the World.
When Red Ribbon Asset Management started out more than ten years’ ago, I was often asked whether regulatory structures on the subcontinent were robust enough and resilient enough to give the level of assurance investors could expect from more developed markets, and in those early days it was sometimes difficult to give an unqualified yes.
But not anymore…India has changed so much over the intervening decade, with radical and cutting edge initiatives being introduced every year to push back against unacceptable business practices.
Anyone investing in India today can expect to find all of the regulatory certainties and safeguards they would expect from developed markets and the initiatives on audit referred to in the article (a crucial matter for any investor) are simply the latest element in that cycle, albeit a very important one. It is all part of the process that is making India one of the most exciting and fastest growing markets in the world.
March 28, 2017
The Queen of England learned a new dance this month: she was taught Indian Mudras, or hand gestures, by the celebrated dancer and choreographer Arunima Kumar; and in keeping with the dignity of the occasion the lesson was conducted in the State Room at Buckingham Palace: “We brought Indian Art into Buckingham Palace” Ms. Kumar proudly announced afterwards. Not for the first time, you might be thinking; people have been bringing Indian Art back to the United Kingdom for centuries.
The Prince of Wales set off on a four-month tour of the subcontinent in 1875 and he managed to bring back a spectacular amount of Indian Art: no less than seventy four precious artefacts from the toshkhanas, or personal treasuries of each of the 21 Provinces he travelled through; including a seventeenth century gold Durbar Set from Mysuru and a sixteenth century jade attardan from Jaipur (the largest ever made). They have been in the Royal Collection ever since but you will be able to see them at the Victoria and Albert Museum this summer as part of the UK India Year of Culture 2017 celebrations; the Queen’s dancing lesson this month formed part of the inaugural events.
And it was no coincidence that the most senior representative of the Indian Government watching Her Majesty dance was Finance Minister Arun Jaitley.
The United Kingdom and India have a richly textured history reaching back to the days of the East India Company, and that relationship is now being radically refashioned as part of Britain’s post-Brexit world. Given the UK India Year of Culture is part of the same process it seems wholly appropriate that the Finance Minister of India should have been there to see it on its way.
India overtook the United Kingdom as the World’s fifth largest economy in December of last year and it is currently the fastest growing large economy on the Planet. Little wonder then that Theresa May’s first foray overseas after the EU Referendum last year was to India; and less wonder still that her visit coincided with the launch of a new generation of ten-year Rupee Bonds being traded on London’s Capital Markets. Historic ties and a resurgent economy give India a special significance for the United Kingdom in the post-Brexit world.
But just how important is all this for India?
It is a question well worth asking, especially at the moment because today’s cultural icons, the equivalent of the sixteenth century jade attardan from Jaipur, are social media, telecoms and the internet: and they have all been holding up pretty nicely on the subcontinent; primarily, of course, through the vaulting ambitions of India’s richest man, Mukesh Ambani.
It would be an understatement of titanic proportions to say that Ambani surprised the business world when he launched Jio telecoms in India last September, with a colossal initial investment of £25 Billion; allowing its burgeoning population to secure (initially free) access to data spectra on a wholly unprecedented scale. In the past six months alone Jio has signed up 100 Million new customers and is now carrying more data than either China Mobile or AT&T; and bear in mind too that the population on the subcontinent is predicted by the United Nations to be the biggest in the World by 2020, so it is difficult to underestimate the future growth potential of its telecoms sector. For the moment at least, Jio is uniquely well placed to reap the benefits of that growth.
All of which might explain why Vodafone has this month announced its long-awaited merger with Idea Cellular (India’s third largest telecoms supplier); not least because Jio plans to start charging its 100 Million (and growing) customers for its services from 1st April this year so it looks as though a price war could be in the offing. It should all get very interesting for both key players and for the sector generally; but as we have had cause to comment on this site before, there are no fleas on a dead dog.
Vodafone is a United Kingdom company with operations worldwide; and the Group is being drawn deeper into India for the simple reason that India obviously matters (for a whole range of reasons, not least its huge potential for growth); and the same can be said of other substantial United Kingdom companies investing into India in other key sectors at this critical juncture in its economic development. This is all about these companies seeking to share in the steady release of India’s explosive economic potential. It is, in short, about something much more than diplomacy and post Brexit trade missions.
Something more even than a courtly dance at Buckingham Palace.
Red Ribbon CEO, Suchit Punnose said:
I was pleased to hear of the launch this month of the UK India Year of Culture 2017: our two countries have such a rich heritage in common, admittedly sometimes strained as all friendships are but always grounded firmly in a mutual respect for each other; and now, as the article points out, we are both moving into a new era of co-operation as the United Kingdom gradually looks outwards to its traditional friends and trading partners in the post-Brexit world. We saw a good example of that in the Trade Mission to India headed up by Theresa May last year and I expect the UK India Year of Culture will throw up a lot more opportunities for further common ties to be forged between businesses in both countries.
But above all else, the historic relationship between the United Kingdom and India is now being refashioned in the heat of India’s extraordinary economic growth. The Indian market is simply impossible to ignore, which would explain the level of investment into the subcontinent by UK and European companies over recent years. The Vodafone merger this month is only one of many striking examples each being driven by the sheer pace of economic change on the subcontinent.
January 27, 2017
While the world slept and at the stroke of midnight on 15 August 1947 India, as we all know, woke to independence; but once it had rubbed the sleep from its eyes the next morning, it found in its brave new day that it still had a King (George VI) and it still had a Governor General too (Lord Mountbatten); and it was to take India another two years, eleven months and eighteen days before it replaced both of them with a formal Constitution, which is why 26th January is celebrated each year on the subcontinent as Republic Day. But the historic date of 26th January 1950, the true birth date of independent India, is memorable for more than its parades and parties; we should not forget that it has a genuine economic resonance as well.
The Indian Economy had virtually stagnated for fifty years between 1900 and 1950, and of course, much of the country’s pre-1900 wealth had been created only to be carried promptly back to London or Leadenhall Street. Average growth in those 50 years before true Independence was a mere 0.5%; but once the British had departed, India almost immediately embarked on a concerted programme of Central, State Controlled Planning which lifted average growth to 3.5% per annum within ten years. It was, on any basis, a staggering achievement; and one which was quickly appropriated into economic dictionaries and lexicons as the “Hindu Rate of Growth”; the new Indian economy was certainly something to be proud of.
And prouder still by the 1980’s when growth rates reached an unprecedented 6% per annum.
Conventional economic analysis divides India’s progress since 1950 into two distinct periods, pivoting sharply on the central axis of the economic reforms of 1991; but looked at in its historic perspective, that analysis begins to look more than a little misguided.
Because the truth is that ever since the Constitution of the Republic in 1950 there has been a steady, broadly consistent and sometimes striking rate of growth on the subcontinent. And of course it is an inescapable fact that since 2004 India’s annual rate of growth has been truly astonishing, but seen in its proper perspective that is not only because of the absolute figures for growth achieved in the period (8.5% per annum in 2008) it is equally about the shifting paradigm of the growth itself.
In 1950 the combined share of Trade, Transport and Communications in Indian GDP was 10%. The equivalent combined figure by 2008 was 32%; these three Sectors together constitute the biggest agents for growth in the economy and that tells us something not only about the way in which the Indian economy has grown since 1950 but also about how it is likely to grow in the future. It is a lesson well worth paying attention to.
When the British Government made India its first port of call after the Brexit referendum last year, it was at pains to put infrastructure spending at the centre of its agenda; both governments signing up to an MOU that improved access to London Capital Markets at a time when the Indian Government is already a long way down the road to implementing a series of Transport and Communication projects on a breathtaking scale. Improved access to capital markets under the terms of the MOU comes at exactly the right time to kick-start the crucial part which Transport and Communications will have to play in future Indian Economic Growth. It is the single biggest lesson to be learned from economic history on the subcontinent over the past thirty years: you ignore infrastructure spending at your peril. And it is a lesson which the Indian Government seems to have taken firmly on board.
In purely political terms it is also interesting to take a look back at the economic climate which was prevailing immediately after the Constitution was adopted in 1950. As we have seen, fifty years of economic stagnation were converted into growth rates in excess of 3.5%; and this happened substantially because of a concerted policy of Central Government Planning; the type of Central Planning which has now been almost utterly discredited in favour of a looser, open market economy. But that shift in political thinking has certainly not stopped the Government in India from playing a continuing part and crucial part in orchestrating infrastructure spending across the subcontinent. That should not be seen as a bad thing (as each of the Governments of the United Kingdom and India recognised during the Trade Mission last year): infrastructure spending is simply too important to be ignored.
Having just celebrated Republic Day this year, that is a lesson we should all remember.
Red Ribbon CEO, Suchit Punnose said:
India has come a long way in the last, near seventy years; and it can sometimes be easy to overlook the scale of the progress the country has been made over that period, dazzled as we might be by the astonishing, exponential growth of the last decade. But it seems to me the article is right to seek to put the last decade in its proper, historic perspective. The resources which India has to offer have the capacity to make it a real power in the economic world, and of course only last month we learned that it had moved up to fifth place in the world economic league. We should never forget that this is far from the work of ten years; it is the culmination and expression of India’s true economic potential.
And having just celebrated Republic Day, it is certainly appropriate that we should keep that in mind.
January 09, 2017
All of the territories and properties belonging to the East India Company were transferred to the British Crown in 1858 and the Crown went on to take political and administrative control of India for the next 90 years, rapidly accelerating the pace of economic growth on the subcontinent as it set out to demonstrate that whatever the East India Company might have done, it could do better; which, on the whole, it could. Major public works programmes proliferated up and down the country; and given it was easier for the Imperial Government to secure loans for large capital projects, it wasn’t slow to flex its economic muscles, combined as they now were with full policy making powers across all of India.
And in the intervening years since 1858 India, with more than two hundred times the population of its former mother country, has never in a single year recorded a higher domestic economic output than Britain.
Not, that is, until now.
Forbes Magazine reported last month that India has now become the Fifth Biggest Economy in the World, after the United States, China, Japan and Germany and with a well-modulated sense of understatement, the Minister of State for Home Affairs, Kiren Rijiju, described the historic moment as “a big leap”.
It is indeed a big leap, but it is also part of an even more historic trend.
India had been expected for some years to leapfrog Britain into fifth place in the world economic league, but most analysts including the highly influential Centre for Economics and Business Research (CEBR), had expected it to have to wait until 2020 before crossing the crucial threshold. And it’s worth reflecting on that fact for a moment: because a full three years ahead of projections, India has moved into fifth place on the Global Stage with its economy still forecast to grow at a consistent six to eight per cent per annum (compared, for example, with the United Kingdom’s one to two per cent); so where will India be in three years’ time?
There is a virtuous circle at the heart of all economic forecasting: growth breeds confidence and confidence breeds growth, and India now finds itself sitting at the heart of an unprecedented expansion in its domestic infrastructure programmes. As we have commented before on this site, the Indian Government has been launching project after project, committing dizzying sums to new transport, energy and capital developments which must surely by now have convinced even the most hardened economic sceptic that it has the firm resolve to follow through and build on these historic trends. Is it any wonder that the first Trade Mission of the newly established Government of Prime Minister Theresa May headed straight for India? Is it any wonder that the Trump Corporation sees India as its most fertile market for growth? And is it any surprise that London’s Capital Markets have been geared up specifically to support the most ambitious of India’s expansion plans?
Less than two weeks ago we heard that IL&FS Engineering and Construction (IL&FS) had been awarded a new Rs 242.2 crore contract by the Government of Karnataka for the widening from two to four lanes of the highway between Bidar and Humnabad, expected to be completed in two years’ time; and IL&FS is already working on a major project in Karnataka for the Bangalore Metro Rail Corporation which is worth no less than Rs 326.99 crore. These and projects just like them, already taking place up and down the subcontinent, are the key drivers for future economic growth in India.
In his short, eventful lifetime Robert Clive came to dominate the extraordinary economic creature which was the East India Company; and when he was called to give evidence before the British House of Commons to deal with widespread allegations of embezzlement and appropriation which were dogging the company he said candidly that given India’s great wealth it was a wonder only that more wasn’t stolen. We’ve come a long way since then. India is finally taking its place at the top table of global economies, standing on its own two feet and marshalling its huge resources for itself. Who knows what the future holds?
Red Ribbon CEO, Suchit Punnose said:
There can be no doubting the historic significance of India leapfrogging Great Britain so as to secure 5th place in the global economic tables; indeed, when set in its full economic context it is likely to be a truly game-changing moment for the subcontinent. But for my part I am not surprised: as the article points out, economic growth is all about confidence and confidence will, in turn, engender further growth; and India has certainly not been short of confidence over recent years. Just look at the scale of its infrastructure programmes which at times have been simply breathtaking in their scope.
Britain turned India into an imperial powerhouse through investing in what we would now call public infrastructure projects. One hundred and fifty years later, India under its own steam and fuelled by its own ambitions is set to match the ambition of its former colonial mother country; so it seems appropriate that it should now be taking its place at the top economic table.