Filter Coffee #003

On India's future, and business no-travel

Friends,

Happy Sunday! Grab your morning kaapi ☕️ and your copy of this issue, and let’s get right into it.

Is 🇮🇳India the new 🇨🇳China?

My dear friend Saurabh (Chandu) Misra sent me a report by UBS regarding this question (🔗 click here to download a copy) with a note:

“India will be back where she was before the industrial revolution, but without poverty, by 2050 (within 100 years of independence); quite an achievement - with per capita income approaching middle-income level.”

This note resonates with my own belief and optimism that Indian business will scale up and gain the competitive edge required to dislodge China from its preeminent position in the world market. I highly recommend you download and peruse the entire report, but let me share a few excerpts and thoughts.

UBS sees India as potentially the world’s next growth engine and favours gaining early exposure to India. It considers India to be the only country to be capable of matching China, though she may not quite be the next China. However, India has the growth potential amidst a confluence of external and domestic factors that are coalescing, which could help her economy leap forward. The report says:

“Its growth will be driven by consumption and services, not exports. It has demographics on its side, a long entrepreneurial tradition, an expanding consumer class, significant headroom for productivity improvements, and the confidence that comes from a strong sense of its civilizational pedigree and destiny.”

The report highlights several key takeaways, two of which I found particularly significant:

1. India’s future is bright:

   • Enviable GDP growth: India could achieve 9.5% nominal GDP growth in the next decade. 

   • Youthful demographics: India will add 110mn workers by 2030; one-fifth of the world’s working-age population will be Indian. 

   • A mature tech sector: India’s IT industry is one of the biggest globally by revenue.

2. Investing in India is not easy, but not impossible:

   • India is one of the last large population markets that are yet to be truly discovered.

   • Waiting to invest could mean high opportunity costs.

   • Difficulty of investing is not from lack of opportunities, but rather from obstacles hindering foreign investors from tapping into local markets.

As for e-commerce, the report carries an interview with Mr K. Vaitheeswaran, co-founder of Fabmart.com. He says: 

“The Indian e-commerce market differs from China in these aspects: First, fundamentally, the Chinese market is protected from foreign competition and investment. This has allowed local Chinese entrepreneurs like Jack Ma to build large scale and subsequently take their businesses like Alibaba global. On the other hand, the Indian market is more open and allows foreign competition and investment. This means that Indian startups like Flipkart get acquired early and global giants like Amazon are able to come in and build scale quickly.”

The investment in Jio by world players that we touched on in last week’s issue also bears testimony to the openness of the Indian economy.

Indian FDI regime is wide open and what puts India leagues ahead of China is the Rule of Law and access to justice. There are countless cases in which Indian courts have upheld the rights of foreign investors and companies. I cannot imagine such protection being accorded to investors in China. The report does not address this aspect that I consider to be very germane to the investment case.

Corporate Governance is another dimension that warrants consideration. I don’t think China is anywhere near India when it comes to transparency and regulatory reporting. I will speak more on this topic in a later edition.

Aside from the wealth of information provided in the USB report, it also included two quotes from masters in their respective fields that really stayed with me:

“We owe a lot to the Indians, who taught us how to count, without which no worthwhile scientific discovery could have been made.”
- Albert Einstein 

“India is the cradle of the human race, the birthplace of human speech, the mother of history, the grandmother of legend, and the great grandmother of tradition. Our most valuable and most artistic materials in the history of man are treasured up in India only!”
- Mark Twain

✈️ Business No-travel

I confess to harbouring a travel bug. Ever since the first lockdown, I have been grounded and the urge to travel has only grown. So, how has that affected me and business in general? Not in the least,  as I have discovered. I am in a kind of simulation, where I zip back and forth in virtual space. At times I am Zooming past, at other times with Teams and yet others in a Google Meet. As a corporate lawyer, I hold virtual meetings with clients and as a Director, I attend all board and committee meetings in virtual mode. It’s just like business as usual. So, what’s missing? The person-to-person interaction, the exchange of pleasantries, the gossip and the gyaan that one gets.

As a member of several boards, I asked the business development experts as to what has changed in CRM (customer relations management) and how ‘no-travel’ has impacted business. I gathered that marketing services like IT & ITES  aren’t as impacted as much as goods, both FMCG and Consumer Durables. In either case, virtual meetings took place between parties and partnerships were forged. Those who had business with the Government did not have it quite as easy, though.

Almost all businesses had little-to-no travel expenses, which helped them prop up the bottom line in Q1 (April-June ), and this is expected to continue in Q2 as well. The new normal of virtual meetings is expected to continue even when ‘normalcy’ gets restored as parties on both sides have come to realise that travel, unless it is a must, is best avoided. The collateral benefit of cost savings will make this change stick. You should browse the NYTimes report, titled ‘Best Guess on When Business Travel Will Recover? It Could be Years…’ (🔗 click here to access it).

Debashis Chatterjee, MD & CEO of MindTree, has this to say:

“Mindtree has found the new normal of virtual meetings with customers in different geographies mutually beneficial. The frequency, number and the duration of meetings, and the quality of discussions have significantly helped both parties focus on critical issues and service delivery processes. There's an enhanced ability to reach out as and when needed, and the frequency of travel as it existed before COVID is likely to level off post the pandemic, making virtual meetings both cost-effective and time-effective to both Mindtree and its valued customers.”

Debashis summarises it well and I do think the advantages of virtual meetings will soon create a new trend in managing customer aspirations and achieving management objectives. However, there are certain aspects of travel that I miss - making a new acquaintance, a chance meeting with an old friend, just being among people, browsing in an airport bookshop, and so on.

Mr SN Subrahmanyan, MD & CEO of Larsen & Toubro too says that one of the biggest adjustments for him during the lockdown has been not being able to travel. (🔗 click here to read the full interview with him)

Potpourri

Keeping your wits about you and having a sense of humour is vital to staying sane and calm. I regularly read a weekly column in The Hindu by Sri J Mathrubhootham that I recommend to you. (🔗 click here to read one of his best)

The kids (young and old) in our family had a great time across continents playing a “virtual room escape” game via Zoom - judging by their excitement after escaping, I highly recommend you try one of them out! (🔗 click here for the provider they used)

Gratitude moment

The situation all over the country ( not to forget the world over) is rather grim and uncertain. But the frontline medical staff have been plodding along stoically risking their lives. Unmindful of the sacrifices made by the paramedical staff, the ambulance drivers, and others, we tend to wallow in self-pity and think of nothing else but small discomforts that we experience.

COVID time is giving time. No, not just money — more than that. Volunteering to help the relief workers, the police, the less privileged section of the society without expecting any recognition or reward of any kind. I came across this poem by an unknown author, which my good friend Rajesh Patel, Architect sent me and I would like to share it with you:

ALL GAVE SOME - SOME GAVE ALL

I did some charity
During lockdown.
Declared it to the world
Like an educated clown

I donated food to the needy,
And posed for the same,
Made amply sure
That I was in the centre frame.

While I boisterously declared
I’ve such a charitable mind,
Someone quietly sacrificed his life
Leaving wife and kids behind.

Suddenly my stature
Seems petty and small.
All gave some…
But some gave ALL.

On that solemn note, I urge you all to remain happy and content. Stay safe and stay blessed. Don’t fret about things that you no longer can have or do. This quote from an Instagram post says it all:

“Things our lives revolved around - work, gym, malls, movies, society have all gone for a toss as we are learning to live without them. It has taught us that in the end, it’s your own family and home that keeps you safe.”

See you next week!