Lisa Praschma – 29 July 2024
Recently, I had the opportunity to attend an interview in London between Hendrick du Toit, founder and CEO of Ninety One, and His Excellency Mr. Vikram K Doraiswami, High Commissioner of India, to the United Kingdom. I found this particularly intriguing since India constitutes 19.15% of the MSCI Emerging Market Index. Our fund managers, however, have allocated just over half of that, with 10.5% of our Emerging Market exposure invested in India. This decision is driven by valuations. Despite this, India still holds a significant position in our Emerging Market portfolios. Below are my key takeaways from the discussion.
1. Demographics
India’s demographic profile is one of its most significant advantages. With an average age of 28, the country boasts one of the youngest populations globally. This youthfulness is in stark contrast to the aging populations of many developed countries. The implications of this are profound in the potential workplace.A younger population translates to a larger, more dynamic workforce. This can drive economic growth, innovation, and productivity. As older populations in countries like Japan and many European nations struggle with shrinking workforces, India’s youthful demographic provides a comparative advantage.
2. Digitisation
India’s embrace of technology is revolutionizing the country. The push towards digitisation has had several transformative effects:
- Inclusivity: Digital technologies are breaking down barriers to economic participation. From rural areas to urban centers, citizens across all social classes are now able to engage in the modern economy. Digital payment systems, e-commerce platforms, and online education are just a few examples of how technology is levelling the playing field.
- Entrepreneurship: The digital revolution is fostering a culture of entrepreneurship. Young Indians are leveraging technology to start businesses, innovate, and solve problems unique to their contexts. This entrepreneurial spirit is driving economic diversification and resilience.
3. Decarbonisation
India’s commitment to clean energy is a critical component of its global strategy. As the third-largest generator of clean energy, India is making significant strides in addressing climate change:
- Renewable Energy: With over 40% of its energy capacity coming from renewable sources like solar, wind, and hydropower, India is setting an example for sustainable development. This transition not only helps in reducing greenhouse gas emissions but also creates new industries and jobs.
- Global Impact: India’s proactive approach to decarbonisation underscores its understanding of the global impact of climate change. By reducing its carbon footprint, India is contributing to global efforts to mitigate climate change, which in turn enhances its international standing and attracts environmentally conscious investors.
- Innovation: The focus on clean energy is driving technological innovation. Investments in renewable energy technologies, electric vehicles, and sustainable practices are positioning India as a leader in the global green economy.
4. Democracy
India’s democratic framework is a cornerstone of its identity and global appeal:
- Stability: Despite the challenges and resources required to sustain a democracy, India’s commitment to this system provides political stability. This stability is crucial for investors who seek predictable and transparent governance.
- Human Rights: As the world’s largest democracy, India aspires to upholding  values of freedom, human rights, and rule of law. These democratic principles enhance its global reputation and make it an attractive destination for businesses that prioritize ethical operations.
5. Deglobalisation
In an era where deglobalisation trends are emerging, India’s stance remains firmly global:
- Trade and Investment: India continues to be an active participant in global trade and investment. Its large and growing market, combined with rising incomes, makes it an attractive destination for international businesses. This openness to global engagement contrasts with the inward-looking policies of some other nations.
- Strategic Partnerships: India is forging strategic partnerships with countries around the world. These alliances enhance its geopolitical influence and create opportunities for economic collaboration and innovation.
- Resilience: By maintaining its commitment to globalisation, India is positioning itself as a resilient economy. This resilience is appealing to investors who are looking for stable and growth-oriented markets amidst global uncertainties.
Conclusion
India’s place in the world today is shaped by its youthful demographics, rapid digitization, commitment to decarbonization, democratic values, and openness to global engagement. These factors collectively create a unique environment that is attractive to investors and positions India as a significant player on the global stage. Understanding these elements is crucial for investors looking to tap into the opportunities that modern India offers.
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