Last week I had mentioned how Urjit Patel, the Governor at the Reserve Bank of India, is keen to promote growth rather than overly manage inflation. It seems the inflation gods may be currently smiling down on India at present as India’s retail inflation has fallen for a second consecutive month. This, of course, could mean the potential for the RBI to cut rates further and therefore continue Patel’s plans to encourage growth above all else. Other positives for growth include S&P’s view that the implementation of GST in India lend more weight to 8% growth projection due to the important structural reform it represents. The Modi government has also been busy taking in a rather larger uptick in indirect tax to the tune of 26% in the months of April – September. This is clearly helping the government’s coffers and a move which looks like is working for the administration. Add to this the strong message given by Arun Jaitley, India’s Finance Minister, that all significant decisions made by the government promote economic activity.
On the topic of GDP growth; there have been many questions asked about why India is growing at a high rate compared to the rest of the large economies across the globe. There are of course many positives to glean on, however, one seems to stand above others – low commodity and oil prices. With India’s status as a consumer rather than producer, the country has immensely benefited from the global situation. Clearly, not all other BRICS have been as fortunate as India. Regardless, the Chairman of SEBI, UK Sinha, believes it would be beneficial for all BRICS to share more information with each other. The main premise of which is to develop the BRICS bond markets but also to help in many other areas by sharing experiences. However, overall, BRICS have been reasonably successful; since 2001, the share of BRICS countries in global trade has more than doubled. The negative, however, is the large debt problems across some of these, even with the low commodity prices.
Over the months I have mentioned how India has been climbing the ease of doing business league tables, however, one might wonder which initiatives are being administered to continue to build on this momentum. It is commonly known that the SMEs of a country forms the backbone and strength of any nation. Additionally, foreign investors have been put high on the agenda by the Modi government (as discussed on many occasions in my previous blogs). Simplification and access to otherwise previously difficult information is a great way of helping the improvement of doing business. What’s clear is there are many global brands either already in India and looking at ways to expand – Uber is a recent example where they are looking to leverage their already strong position the country by launching a bus and mini-van ride shares. Hamley’s, the world famous and premium, toy store is betting on its launch in India as part of its global expansion. Equally, foreign investors, this time, Canadian institutions are heavily investing into India – in fact, funds from Canada have made investments worth more than $5 billion to date. On a smaller scale, Chinese venture capital funds are also taking a greater interest in what looks like Series B and later stages of investing, which can only help the overall Indian start up ecosystem.
To round off, there are some interesting stories from around the world. To begin with, Softbank have named, Rajeev Misra, as the person to head their new $100 billion fund. Yes, you read correctly – one hundred billion! It seems, Mayasshi Son, owner, and CEO of Softbank, has a soft spot for Indian-born managers. Misra does come with a very strong CV and was already heading strategic finance at Softbank prior to being promoted to head of the Softbank Vision Fund. Someone who is very familiar with building value is Jack Ma of Alibaba fame. His e-commerce business has produced outstanding value since their IPO two years ago, however, he believes “the pure e-commerce players will soon face tremendous challenges”. As a result, he is planning to embark on a mission to help businesses globally and not just in China. Elon Musk is a name that is synonymous with technology and innovation. That said, there have been some doubters with the state of his current businesses and some are even questioning: is Musk a messiah or charlatan. There is no doubt he is a visionary but the basic question is has he bit off more than he can chew and along the way has he set himself unrealistic ambitions. I think most of us are intrigued enough to hope this is not the case and we continue to explore wacky and ambitious plans that could, literally, be beyond what we know as normality today.
Author: Dishang Patel