Saturday , 25 May 2019
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A view from Hong Kong

By Tensing Rodrigues*

Today let us go macro. That is, take a broader view of the investment prospects across the economy. How about a view of India from Hong Kong? Let me share with you the salient points in a report on India by Hong Kong based Dezan Shira & Associates. It comes in the midst of a possible shift in the gears during the ongoing general elections. But it seems to say what we have said before: Go on, the going is good.

Perhaps what bothers many investors is the ‘fatalistic’ hype that gets generated at such times. Personally I prefer to keep off the media in such a situation for the sum total of all the noise that is made in the media seems to be the comparisons that the grownups tend to give up as soon as they grow up. Well, that seems to be the point that the report too makes, there is much more beyond those comparisons that really matters.

The report begins with a theme that is uppermost at the moment. “In 2014, when Prime Minister Narendra Modi established a government, businesses rejoiced, markets soared, and foreign investors poured billions of dollars into Indian stocks. Modi, in his election campaign, had promised millions of jobs and a large economic reform agenda. Now, at the end of his five-year tenure, Modi is yet to deliver on most of these promises.” But that’s not what the report is about.

The crucial message comes next. “However, the Indian economy has continued to grow at an average rate of 7.6 percent, mostly led by an increase in consumption. … India has one of the fastest growing service sectors in the world. Industries such as information technology, telecom, healthcare, tourism, education, and professional services are globally competitive. … India’s growth in consumer spending is more than double the anticipated global rate, and is likely to make it the third largest consumer market by 2030, behind only the US and China. The increase in consumer spending and changes in consumer behavior and pattern, represent massive opportunities that lie in the Indian market. … India is one of the fastest growing economies in the world. It outpaced China’s growth rate in 2014, and replaced France as the sixth largest economy in the world in 2018.”

It is not the arithmetic of promises made versus promises failed that makes sense to an investor. What matters to us as investors is, can we expect to gain or lose investing in this economy. Poll rhetoric will always be what we find it to be: a mating call; it matters little in the long run. The report goes on to list the obvious ironies in the situation. The top ones are the ‘demonetization’ and the GST.

They have become the best Bofors in the arsenal of Modi’s opponents; everything from growth to income to employment is said to have suffered on account of these; even the Dezan Shira report agrees with that view. But these are the very moves that the report lists as the biggest strength of Indian economy; which can make the difference in the long run.

GST for instance, according to the report, is one of the causes of the rise in joblessness. But a few lines down, the report talks of its power to create “a massive unified market. The third largest consumer market by 2030, behind only the US and China.”

What do all these contradictions mean to us as investors? They simply mean, just go on the going is good. Whatever the outcome of the elections the going will be good. The economy will ‘walk’ its own way, not the talk of the rabble raisers. We are not the China, where the omnipotent politburo makes or mars. Our decisions happen in the shanties of Dharavi. It is their business wisdom and that of so many Dharavis and Khan Markets across the country, that adds up to push up or pull down the real growth rate. And we are not the US where the paternalistic capitalism of the White House, calls the shots.

We are India. So keep your ear close to the gossip in the fish market, and you know what awaits you in the investment arena. If the guy next to you opts for mackerels instead of kingfish, because the GST has pinched him, rejoice; you can hope to buy kingfish instead of mackerels as the economy falls in line, and ‘honest guys’ like you get your due.

*The author is an investment consultant. Readers can send their comments and queries to investment.ideas.shop@gmail.com