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Since always, India has inspired Westerners exoticism and mystery. Louis Aragon in Les yeux d’Elsa said about her eyes : « Tes yeux sont mon Pérou ma Golconde mes Indes. » (« Your eyes are my Peru my Golconde my Indies »). Using a reference to India, he was trying to name the unexplainable that her eyes aroused in his heart. However, Jean-Joseph Boillot, doctor of economics and social sciences and specialist of India, said about India in the beginning of the twentieth century: “It is the most Westerner of the Eastern powers.”. Indeed, India has much more similarities with us, as Westerners, than we think. Indeed, the philosopher Schopenhauer “had found a confirmation, even a justification of his one mind in the Indian world, which was for him a real mirror” as Ms Kapani, professor at the University of Paris X – Nanterre, said. Nowadays, India is bringing out to the open this mysterious face with ambitious development plans which even reach the space industry making the country the fifth country of the world in terms of launches.
There is no secret that investors should have a closer look to India.
The 8.5% of growth of the National Gross Product across the five last years is significant enough. India has shown strong evidences of its growing reliability and power and how its future is to be bright. Even if the country is energetically dependant at 70% and if it is the fourth importer of oil of the world. Even if the division of the society in different casts is still present and if corruption is problematic (Rajiv Gandhi, first minister of India between 1984 and 1989, said that among 100 rupees gave as social aids, 85 were misappropriated).
Since 1950 the constitution has abolished casts and has implemented positive discrimination. In 1977 the country has reached the eating self-sufficiency. In 1991, Raj licences have been deleted by the former accountant general Manmohan Singh, now First Minister, which has led to the liberalisation of foreign trade. Thus, the country has become the world first exporter of informatic services and the world first producer of generic medicines. What is interesting with India is that the country didn’t decide to become a direct concurrent of China. The country has managed to place itself in economic niches in which China remains absent. So, deciding to invest in India must be motivated by opposed reasons that those to invest in China. And there are good prospects for the future to make that choice.
Socially speaking, India is moving towards tolerance. Indeed, the Indian supreme Court is to re-examine the constitutionality of the article 377 of the penal code which prohibit “against the natural order” sexual relations. Magistrates declared that “moral changes over the generations” and that “the law must adapt to the realities of life”. It demonstrates that on the contrary of China which is in perpetual affirmation of its culture against western countries, India socially and culturally evolves along with western countries. Common convictions can only foresee good commercial relationship coming from this understanding.
The most promising is the economical side according to the ranking of the Centre of Economics and Business Research of the 26 December. Indeed, the British studies institute has ranked India at the fifth place among the principal economies of the world. The study is based on the gross domestic product in dollars which is measured in terms of purchasing power parity. Moreover, a survey of PwC published in February 2017 already stated that in 2030 4 of the 5 principal economic powers of the world would be Asian and India is to be part of it.
India has always attracted for its singularity. The country manages to keep on with this particularity through an incredible and personal dynamic of innovation. To embody this idea the headline of the India Economic Summit of 2010 was “indovation”.
Indeed, 2010-2020 has been declared the decade of innovation and foreign companies form the whole world come to settle in India their R&D centres. Also, the National Innovation Council has announced the creation of a social private fund worth 1 billion dollar called India Inclusive Fund.
The purpose of such an initiative is to encourage the “Indian model” based on the social entrepreneurship centred on the Base of the Pyramid (the poorest). This is this strategy which lead to the development of microfinance, the fact that creating products and services for the poor can be profitable. Hence, India is the leading country in social entrepreneurship with the Nano Ganesh, developed by Ossian Agro Automation in conjunction with Tata Teleservices phones. It allows 12 000 farmers to use mobiles phones to remotely monitor and switch on irrigation pumps used for watering crops in remote locations. But also with Medianels a pioneer in the e-health or Planet Read which fight against illiteracy using principles of karaoke. Nonetheless, India must be cautious, because even if this promising land is farmed by innovative projects and people which make thrive this already flourishing land, we mustn’t forget the backlash of microfinance. In 2010 people from the Andhra Pradesh have died of suicide drowned by debts and some others have left it feeling that microfinance institutions were making money off them.
Thus, as China has almost done, India tries to reach the stage of development and reach out of underdevelopment. The country does it a complete different way than its northern enemy brothers and therefore participate to enrich the world of alternatives in terms of development. India shows that the world is becoming more and more complex and rich, “apolair” has said the French geopolitician Hubert Védrine in 2002.
The Indian Silicon Valley
The Indian awakening is driven to a great extent in the middle of the Dekkan plateau. Surrounded by the occidental and oriental Ghats, there is a city informally called Bengaluru, capital of the Karnataka state, which for a long time had lived in the shadow of its neighbour Mysore. Nowadays the city counts 8.5 million people and is known as Bangalore. It has become since the nineties the most important hub in the information technologies of India. At the beginning the city housed myriad giant outsourcers, making as well subcontracting for western multinationals which settled there call centres as high-end research facilities for the same companies. Thus, in 2006, among others, Google, Microsoft, Yahoo, Amazon, IBM, Axa, HP, Schneider Electric and Goldman Sachs were settled in the city. However, if it has been good founding principles for the development of the city, it has known over the past year a “second coming”, more inclusive, which has seen the born of new Indian entrants on the market among which some unicorns.
Indeed, the city gathers some attractive features which accompany it in the footsteps of the Silicon Valley.First, the city is overflowing with coding talents. The Silicon Valley only has a bigger pool of such a highly qualified labour. This is the bedrock of the development of the third industrial revolution on which Bangalore is surfing. If the second industrial revolution throve in Europe thanks to the huge unqualified work force that Europe enjoyed in the 19th century on the contrary of the other part of the world. This new industrial revolution need to flourish talented people in mastering new technologies and that is exactly what provide the Indian advanced education.
This is the result of state programs as the Skill India one launched in 2010 which forecasts to train 400 million of technicians and engineers. But, it is the case because they begin their career and polish their knowledge in multinationals such as IBM or Microsoft. Now they have the calibre of becoming promising entrepreneurs who challenge nowadays the Silicon Valley Giants after having served them. Moreover, the city as India in general enjoy vigorous investments from the big-name Silicon Valley venture capitalists which hasn’t been feared out by the heavy regulations and the lack of infrastructure. At the frontier between the Western and the Eastern world, Bangalore is also funded by Asian giants like SoftBank and Alibaba. Thus, according to Crunchbase, the city is the fifth city in terms of global technology investment by city in 2016. Finally, the rise of Bangalore is primarily due to the increase of the use of Internet and so mobile phone. By 2020, the country could rise from 150m smartphones users to 750m.
Bangalore sparkles through some companies and among them some unicorns (A unicorn is a start-up which is valued above 1 billon dollar and the term is due to the American risk capital specialist Aileen Lee in 2013). Bangalore welcomes the headquarter of Ola, a taxi-hailing app valued at over $2bn and backed by Japan’s SoftBank. Some are even more impressive as FlipKart founded in 2007. Flipkart is an e-commerce site considered as the Indian rival to Amazon. It is expected to receive funding that could value it at more than $15bn. Both companies are based in Koramangala, a tech cluster in the south-east of the city. Nothing fears those unicorns, maybe fuelled by some magic. InMobi, a mobile advertising group also backed by SoftBank is taking on Google and Facebook while valued at over $1bn. Finally, Mu Sigma, a pure play Big Data analytics and Decision Sciences firm founded in 2004 by Dhiraj Rajaram and located in Whitefield (a part of Greater Bangalore), is valued since 2013 over $1bn. In its deep heart, India is making at its turn the giants that China made before with Alibaba or Baidu for example to emancipate from the rules dictated by the GAFAMI (Google, Appel, Facebook, Amazon, IBM) coming from the West.
It seems to be a mandatory step to access a sovereign development and power in accordance with the ambition that the immeasurable features that shapes these kinds of countries give to them. So those unicorns should be scrutinized by investors who wouldn’t miss enjoying the shinning wealth that these companies are to provide.
The normalization of a more complex world
The case of India’s development is interesting as it embodies the way our world is evolving. We have previously said that the India’s development way was finding an escaping zone from the former bipolar leadership (United States against URSS during the cold war), then from the unipolar leadership (the United States during the 1990s) eventually from an inversion of leadership with the thesis of Hervé Juvin in 2010 in
“Le renversement du monde”. However, India is not lacking power ambitions, but its economic and politic development is more normalising the access to an original development for former underdeveloped countries than bringing the fear of a new overthrow of the world order.
Yes, Western powers are to be equalled and even overtaken, while not be overthrown. But what is to be remembered about India is that as all rising countries, it shins thanks to some pearls therein. 200 million of people are still without identity, 400 million of then don’t have a bank account, 750 million live thanks to social allowances and 68% of the population live with less than $2 a day. Even in Bangalore, that I have presented has one of the pearl that allows the country to shin all around the world public transport is hopeless and urban politics grimy. So, we can nowadays state that development is driven by hubs. Which formerly were regions of the world, then countries and currently cities. It gives to Olivier Dollfuss an opportunity to talk about the birth of a global metropolitan archipelago, and in the future by even smaller and more volatile hubs. This shift that India and Bangalore embody must be considered in every financial approach of the world.
Bangalore could be called the Silicon Valley of India. The truth is, even this nickname is disputed in India. Indeed, located 150km to the southeast of Mumbai, India’s financial capital, Pune is becoming a new hub for innovation according to the director for the DYPDC Centre for Automotive Research and Studies, Hrridaysh Deshpande. Factors of attractivity are the same as in Bangalore because the city was known as the “Oxford of the east” for its many engineering colleges. But, on the contrary of Bangalore, the real estate is still affordable which makes a real advantage on Mumbai. The city’s economy is driven by two large and growing sectors: automotive manufacturing and information technology. Another sector is thriving: real estate. Panchshil Reality, one of the city’s biggest real estate developers by the way constructing Yoo Pune. Two big residential buildings and Trump Towers are also developing the business in the neighbourhood Kalyani Nagar. In addition, the mid-segment of real estate is also flying (between $55.010 and $128.356) said Nitin Nyati, chairman and managing director of the Nyati real estate group. Thus, when looking for investing in dynamic sectors, one should always care about the real estate investment where dynamic companies are thriving because both sectors often flourish at the same time.
While often considered as remote and mysterious, India is becoming increasingly nearby and bright. This dynamic encompasses the country as a whole, but more precisely some of its regions among which Bangalore. This country allows us to see the birth of major actors of our global world but also to understand its evolution. India is a laboratory of the world future. It is the syncretism of former/western development dynamics and eastern/new ones. Capital searching adventures should glance at the plurality of this country remaining cautious to the India syndrome.
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Written by Guilhem Garrel │ Independent financial analyst
Edited and Corrected
by Vee Venski
This article is not a promotion of financial investment. Investing money in financial instruments is risk-reward process. Losses and gains are part of financial investment process. Only invest money you can afford to lose.