Brexit your way to India

A shock wave reverberated around the world in the early hours of Friday 24th June 2016 – Britain formally voted to leave the EU. Being strongly in the Remain camp I think the country has gone mad! The Leave campaign are backtracking on all their propaganda and the support for a second EU Referendum is in full swing (the last count saw over 3.5 million people have signed a petition for this to be debated in Parliament – note only 100,000 are officially needed to trigger this). Will the result mean London will push for what some consider a good option and become a principality much like Monaco? Will there indeed be a second Referendum? When will the trigger be pulled on article 50 of the Lisbon treaty? So many questions! Newton’s Third Law clearly states “every action has an equal and opposite reaction” and rather than focusing on the negatives I would like to look at the potential upside instead; specifically for India. Don’t get me wrong; there is no doubt the challenges are significant and will take a time to wade through. However, I and a number of experts in the market genuinely believe India, US and China will be the biggest beneficiaries in any fallout; with India potentially being one of the biggest beneficiaries (note if you don’t have an FT subscription you can use this link to find the article via Google). What I’m saying is the “opposite reaction” in this instance is the ability for India to become the place to house investment £’s while there is so much uncertainty in Europe. Within the UK those who believe India will benefit continues to grow but the feeling from inside India is also one of positivity and opportunity, specifically the belief that India will prove itself to be a destination of choice when it comes to investors looking for stability and growth in these turbulent times.

What’s more is that the Indian government is openly welcoming FDI (foreign direct investment) into India and in fact now claims to be the most open economy in the world for FDI. This is enormously encouraging for investors and the economy as a whole. Clearly, speed and agility of change are important in such an environment, and this is exemplified by PM, Narendra Modi’s, drive to speed up the execution of infrastructure investments. Here is another example of the Modi government pushing infrastructure projects; this time inland waterways and coastal shipping. The potential of taking advantage of the vast Indian coastline and reducing transportation costs is clearly a big draw. What this does show me is that the administration isn’t pinning all its infrastructure hopes in a single (traditional) area. By now you all know how important infrastructure projects are to the Indian economy. To fund these one requires deep pockets which most would agree China can boast. I suspect that is why Arun Jaitley, India’s Finance Minister, is attempting to woo Chinese investors to ‘Invest in India’.

By now you may know, at Earlsfield, we invest exclusively in India, offering an asset class in early stage technology-enabled businesses that are otherwise not widely available to UK and European investors. What’s important in this equation is the exposure for such businesses, and there is no better example than those Indian start-ups flying the flag at WSJD Live. Why do we believe India is the next big thing – for one with all its challenges it is ultimately one single market with amazing potential for scalability and disruption. This, in turn, results in exceptionally large market sizes for sectors and silos in India; no better example being the Indian analytics sector which is projected to grow to $16 billion by 2025. And, believe me, there are many such examples.

Quite often in life, weaknesses can become one’s strengths, and I believe if India’s youth continue to adopt this mentality nothing will hold them back. India is one of those places where most businesses will have some form of social impact even if it’s not explicit. In this instance, I refer to a very innovative social impact invention by a young Indian entrepreneur to help his friend that ensures those who are visually challenged will never be short-changed again. Not only is this tool extremely affordable but it clearly shows that the wave of entrepreneurial change in India is starting to give back in more ways than one. Long may it continue!!

Author: Dishang Pateldish-colour