Youth and FDI – it’s the India way

15th August 1947 is when India gained independence from the British Empire. It’s no secret India is a very young nation and the government recognises that enough to put more emphasis on backing eco-systems such as start ups, where founders tend to be in their 20’s. 70 years on from independence, what are really important to take note of are the younger generations who will form the future backbone of India. Given India is still considered a developing nation, even though there continues to be so much prosperity to speak of in various factions, the basics, and I mean real basics, like access to electricity, infrastructure for connectivity, access to communication to name a few, are vital. These will allow future generations to grow up in a more innovate society as well as make it easier to do business. Even more encouraging, and to show just how much the mindset has progressed in India, is the potential change by the government as to how much maternity leave women should receive. Of course these all point to one thing – long term benefits to India starting from grass roots (incidentally, very much an approach of the Modi administration). To put some perspective on just how much potential India has, McKinsey recently reported how it believes the economies of the top five Indian cities will each grow to equal the current sizes of middle-income countries economies.

Of course, there are many giants of the business world trying to take advantage of the India story and none more so than those in the world of technology. As most are well aware, LinkedIn was recently acquired by Microsoft, however, it seems that hasn’t dampened their big plans for India and how it is their second largest target market. Amazon is another behemoth of the technology world who have pinned their hopes on India’s large consumer market. They are taking India’s largest technology start up, Flipkart, head-on with great success. Much has been written about the amount of money Amazon have invested to enter and compete in India with innovation being key, for instance, Jeff Bezos recently said: “team in India is inventing at a torrid pace, and we’re very grateful to our Indian customers for their welcoming response”.

Among others, Fintech should benefit from a recent easing of FDI (Foreign Direct Investment) norms. The cabinet permitted foreign investment through automatic route in “other financial services”. Given India experienced a year-on-year growth of 29% in FDI, to the tune of $40 billion, this potentially represents a massive move and of course opportunity to grow FDI further. As well as PM Narendra Modi, I believe one other individual requires a special mention for helping put India back on the map in recent years. That person is, of course, the soon to be ex-RBI governor, Raghuram Rajan. There were so many challenges that he has been equal to during his 3 years that I think it is important to share some of Rajan’s achievements. Just to prove how seriously he takes his job you will not be surprised to see his very professional approach to the last month of his tenure. His replacement has some very big shoes to fill but I’m confident the right person will be chosen for the job and build on the fantastic foundation created by Rajan.

I couldn’t sign off without mentioning Walmart’s acquisition of Jet.com for $3 billion in cash plus $300 million in stock. This is another example of a bricks and mortar business buying rather than building. What is very interesting is how quickly Walmart came knocking after Jet.com site was officially launched. You may be very surprised to hear it was in fact only 1 year. What might be even more surprising to know is that doesn’t represent the fastest acquisition post-investment. The truth is Jet.com was able to grow through investment by VCs who are presumably very pleased with their tidy returns in such a short time. Just to quantify this, the VCs who invested in July 2014 achieved a reported 10.69x.


Author: Dishang Pateldish-colour