Get on board the India train

It’s the world’s fifth-largest economy and it grew by more than 7 per cent in fiscal 2023.It outperformed many advanced and larger, developing economies.

Is it any surprise everyone wants to be part of the India story?

I talked to Erin Watson, Managing Director Baker & York, for the Blue Lens on Mic podcast to discuss the underlying drivers of this evolving story.

“Everyone you talk to - in business, in the think-tank world, in government - are talking about India,” she said.

Watson said a shifting geopolitical order had helped underscore this growth.

Those “scrambling to try and get on board the India train” are looking to take advantage of “the sheer growth of India's market in the last few decades,” Watson said.

Watson has strong credentials in the area, being Co-Chair of G20 India Think20 and Adjunct Fellow at the Griffith Asia Centre.

The changing international environment, she said, had “largely been shaped by US-China strategic competition”.

“Countries that have been historically very heavy on trade arrangements with China are now starting to see new markets, and obviously India is an important part of this,” Watson said.

“I think that you start to see countries and potentially businesses following saying, ‘is this a different market that we could be looking at?’”

Clear progress

While the pace of progress in India is clear, all parties, including businesses, need to keep abreast of this.

This means keeping the right perspective and making sure we keep updating our assessment about what's happening in India. Because there is a lot of change and our views can quickly become outdated.

I was also joined on the podcast by Anil Padmanabhan, a journalist based in India, who said there was also much nuance to the India story.

India’s impressive headline numbers may even “mask the growth beneath” the surface in some cases, given some sections of the economy are “operating at multiple speeds”, Padmanabhan said.

“[The] national macro numbers are pretty good, especially when you compare it to other countries,” he said. “But having said that, you need to look beneath the bonnet.”

Padmanabhan said India’s population could be viewed through three distinct economic lenses.

“There's an India one, which is the top tier, which is about 128 million people,” he said. “And they have a gross domestic product (GDP) of about $US1.4 trillion and per capita income of $US12,000.

“Then you have India two, which has a population of 300 million, [with] a per-capita GDP of $US3000. Look at the steep fall [there].

“And finally, India three, which is where the bulk of India lies. Their population is 1.2 billion and they contribute about $US1.8 trillion to the GDP, and their per capita income is $US1500.”

For Padmanabhan, international investors would be wise to “look under the hood - because there will be opportunities out there”.

“Catering to this bottom of the pyramid means health, education, electricity, basic things,” he said. “There is huge consumer demand out there.”

Open to the world

Watson said India’s recent trade-deal activity was a sign of the country continuing to open its economy to the world – and take its place in it.

“Free-trade agreements are a key tool in a country's economic statecraft and its foreign policy,” she said. “You can see here that India is trying to assert itself internationally as it grows economically.”

Watson was eager to make the point that activity in India would never compare in scope to China in global trade, and any comparison was ultimately unhelpful for all parties.

“I think that's one of the problems… some approaches have [encountered] with India - that it's going to be the next China, is going to replace China, and I don't see that,” she said.

Neck and neck

Padmanabhan said the world had really only seen two gigantic growth stories over the past few decades and so it was inevitable they would be compared. Even if their stories were vastly different.

“One is China, and the second is India,” he said. “Both are neck and neck on population at this point [and] people tend to weigh the two together.

“Having said that, I don't agree with that comparison because frankly, they're comparing apples and oranges.”

The China model of growth is very different, Padmanabhan said - and India’s growth (and economy) will always be unique.

Such growth is “not going to create a ‘West’ in India, that's very visible,” he said. “It's a cultural thing.”

“Investors have to calibrate their approach to something which is different. Don't try to put it in a particular silo. It won't fit and then you will have a problem with your investments.”

International relations have shifted in recent years to the point India is now negotiating with larger economies as almost an equal, Padmanabhan said.

"India has acquired the ability to give and take in a negotiating table,” he said. “Earlier, it was all about take, because… the economy was not still strong. There were huge challenges.

“That is the big change that we are seeing today in India, at the global high table, which is probably why it is getting so much recognition, particularly in the West.”

Richard Yetsenga is Chief Economist at ANZ

This article was originally published on ANZ Institutional Insights