The India Opportunity: Sunil Singhania, Saurabh Mukherjea And Nilesh Shah On What Lies Ahead

Rising population with disposable incomes, so-called China's economic suicide, exponential digitisation and rapid financialisation of savings will shape India of the future. The only risk is policy that stifles ease of doing business.That was the view of three of India's top investment managers at the The Road Ahead panel discussion during the opening session of BQ Prime's The Indian Opportunity Summit in Mumbai on July 13.A growing population that can afford beyond ‘Roti, Kapda and Makaan’ (food-clothes-housing) is India’s big opportunity, said Abakkus Asset Manager LLP Founder Sunil Singhania."In the next ten years this 35-40% would be almost 65%, and there will be some population growth also," he said. "From roughly 45 crore Indians who can afford beyond 'roti-kapda-makaan', this number would be beyond Rs 100 crore."This will impact consumption, infrastructure investments and in turn translate to growth in the Indian economy, according to him..Three key factors have accelerated India's growth pace, according Saurabh Mukherjea, founder, Marcellus Investment Manager Pvt."India will witness a storm of change in the next decade. Financialisation happened in the space of three to four years with GST and demonetisation," he said.Digitisation finance via UPI is showing exponential growth and financialisation will happen at a non-linear rate, he said. India will see $1-2 trillion of domestic investment inflows in the next decade."And China’s "economic suicide" will trigger "exponential growth" for India’s key industries, Mukherjea said, referring to global supplying chain diversifying from the 'factory to the world'."Chinas’ economic suicide doesn’t have any precedence…If we go to Chennai, Bangalore, we can see the rate at which that is transforming India," Mukherjea said.That, he said, will trigger "exponential growth" for Indian pharmaceutical, electronics, defence, medical device manufacturing industries..The opportunity for India is unlimited, provided the country does not make missteps, said Nilesh Shah, managing director, Kotak Mahindra Asset Management Co.“In a rising tide, every boat will get lifted. All you have to ensure is that you are not sitting in a boat which has a hole in it, otherwise that will sink," he said during the same discussion.India's economy could be 50 times bigger if "all of us get the same environment as in the U.S." he said. The Silicon Valley and the U.S. score over India in encouraging entrepreneurship and ease of doing business, he said."As long as we don’t score self-goals and continue to encourage entrepreneurship, rising tide will lift. Whether it grows 5 times or 50 times it will all depend upon us." .India Opportunity Summit: China’s Suicide, Multi-Decadal Cycle, Power Of Holding And More.Gentlemen, thank you so much for taking the time out and joining in straight to the cue. The India Opportunity that is spoken about, everybody knows though there is this great population demographic advantage that we have, we are geopolitically well-placed, it is a widespread bucket with not too much concentration in any particular sector, so to say, unlike some of the other major economies. So, these are all well-known facts. What do you think of the India opportunity, as we sit with the Sensex on 66,000?Sunil Singhania: I think, you know, we all talk about the anchor or the host who said that when he was born, it was 650 and now it is 65,000. I think these are numbers. As we grow, the economy’s size increases and obviously the Sensex or Nifty levels are a reflection of that. I think, you know, we all know that we have grown from zero to 1 trillion and 1 trillion to 2 trillion and 2 trillion to 3 trillion. But actually, what is the big opportunity? Right now, if you see in India, you have roughly 35% to 40% of the population, which can actually spend money on anything. What I mean is, you know, people who have income levels which are Rs 6 lakh and above per annum. Those below that, they are striving to just meet their day-to-day needs. I think in the next 10 years, this 35% to 40% is going to be almost 65% and there will be some population growth also. From roughly, like 45 crore Indians, who can afford beyond Roti, Kapda and Makaan, this number is going to be like, and I think that is the big opportunity as far as India is concerned. We all know that this $3 trillion will become six and six will become eight and eight will become 10. But when these 50 crore become 100 crore, I think the impact on everything, whether it is consumption, whether it is on growth, whether it is on need for infrastructure, whether it is the number of cars sold, etc., will just be very, very different/difficult and, you know, we are not inventing anything new. If you see what has happened in Japan, Korea, Taiwan or even the U.S., or China, I think we just have to extrapolate that. So, for me at least, I think that is a big opportunity..Okay, so there is a big opportunity as the number of consumers in India keep increasing, consuming everything which is consumed by very few right now. Is that one key opportunity?Sunil Singhania: That will get reflected in the economy side. So, to say that $3 trillion is going to become $10 trillion, it is a given, you know. We can't debate or dispute whether it is going to happen. The only thing you can debate is whether it is going to happen in X years or X plus two years..Thanks Sunil, for that opener. Saurabh, what is the big opportunity that you think of?Saurabh Mukherjea: I think more than the opportunity, Niraj, it is worth thinking through the nonlinearities involved. The human mind struggles to think through nonlinear changes. I think we have lived through the last five, six years. We have lived through India, three nonlinear changes, which I don't think are fully played out in the effects that will be felt for the next decade or so. The first nonlinearity is financialisation. So, I remember 6-7 years ago, I used to be a broker and I used to go to the office of both these gentlemen, I used to worry big-time about India, worry about accounting fraud. I used to worry about the macro economy. I used to worry about lack of financial penetration. Then, in the space of 3-4 years, demonetisation happened, digitisation happened very quickly, financialisation took off, the mutual fund industry took off and if you look at the pace of that, it is remarkable. So, if I look in the PMS industry, where I worked, 15 years ago, PMS AUM in India was Rs 20,000 crore. Today it is pushing Rs 2,80,000 crore and a big part of that is in the last 5-6 years. So, financialisation will not happen at a linear rate. It will happen at a nonlinear rate, pretty much everybody in this room, including the industry that Sunil, Nilesh, and I represent, we will see rapid growth, I reckon we will see something in the vicinity of $1 trillion dollars to $2 trillion dollars of domestic influence over the next 10 years. The second nonlinearity is digitisation itself. It is so hard to believe that UPI was only launched six years ago, and today, UPI transactions account for $1.8 trillion; 51% of GDP is going through UPI, and the reason for that is network. If Niraj is on UPI, there is a greater incentive for Saurabh to be on UPI, if Niraj and Saurabh are on UPI there is a greater incentive for Nilesh to be on UPI. So, if you look at the NPCI website, the digitisation of transactions is an exponential curve. Covid was a bad exponential curve. Digitisation of finance—it is a good exponential curve. This has huge effects, reduction in working capital cycles, reduction in tax-evasion, lower transaction costs, the benefits of which we will see in the next 10 years. The third nonlinearity is China. China's economic suicide, I don't think has any precedence in the modern era. If we go to Chennai, if we go to Bangalore, we can see the rate at which China's economic suicide is transforming India. So, tomorrow the world's largest machine tool plant goes live. Two years ago, had you told me that in 2023, India will open the world's largest machine tool plant, on 2,20,000 square feet, and an unlisted company based out of Kolkata, with the plant in Bangalore, will do it? I know China had the world's largest machine tool plant for the past 10 years, which stood at 2 lakh square feet. Just to give some people a sense of the area, 2 lakh square feet is broadly the area of two football fields. The plant is two-and-a-half football fields. And, on the same site in Hosur, three factories in parallel will go live, and the factories will be 100% occupied. This is the impact that China's economic suicide is having on our pharma industry, electronics industry, and defence industry. Huge swathes of our medical device manufacturing industry will see exponential growth. So, three exponential factors together make for a storm of change over the next 5-6 years and it is very difficult actually to comprehend even for people like us who live in the financial sector. I think what we are going to see in the next decade, probably doesn't have precedents. It certainly doesn't have precedents in India's history. I doubt even China will have seen what we are going to see in the next 10 years..I am sure everybody is happy to hear that. But as difficult as it may be, Saurabh, over the next 25 minutes, I am going to try and grill you on that very topic. Be rest assured.Nilesh to your mind, what is that big India opportunity? It could be market driven, it could be economy driven, it could be just as a nation. Please try and corelate with how people can benefit out of it.Nilesh Shah: There are many Indians living in America. About 50 lakh, and their median income is $1,25,000. We are 142 crore people. We have the same genes, blood. If we had the same per capita GDP, our GDP would be $177 trillion, 50 times higher than what it is today. Now, one can argue that Indians in America are far smarter. Of course, but we still have Saurabh bhai, Sunil bhai, Madhu bhai here. So, talent is not the only issue. One can argue that Indians in America are hard-working. We also work hard. How many of you stay in Andheri West? Every day when you have to cross the flyover, you can imagine how much hard work we do. So, what kept Indians behind in India compared to America? One can argue, infrastructure. When you go to American cities you find infrastructure. In India it was missing. But anyone who visits American airports versus Indian airports will now say that our infrastructure is catching up. So, hopefully that gap will be narrowed down. The real issue is encouraging entrepreneurship. Having ease of doing business, that is where Silicon Valley in the U.S. scores over India. Hopefully, policy-making will now improve, ease of doing businesses has increased but it will one day reach American levels. One day, Indians in India will deliver as much performance as Indians in America. That is our potential, we could be 50 times bigger than what we are today, if all of us get the same environment we are getting in America..So, that is a challenge. What is the opportunity in it? I am just trying to understand, do you look at natural progression as the opportunity or do you believe there are things happening within which you are spotting?Nilesh Shah: Niraj bhai, in the rising tide, every boat gets lifted. All you have to ensure is that you are not sitting in a boat which has a hole in it. Otherwise, that will sink. The opportunities for us not to score self-goals. This equation was valid even in the past. But we have the ability to snatch defeat from the jaws of victory. As long as we don't score self-goals and we continue to encourage entrepreneurship, the rising tide will lift—whether it grows five times or 50 times it will all depend upon us..India is favourably placed geopolitically as well. When you think about the opportunity size, and what is the biggest gain, what will be the first among equals? How do you kind of separate the wheat from the chaff or how do you decide what will be the first among the equals?Sunil Singhania: Why do you want to be even doing that. I think the whole economy is growing. And I always see India to be to some extent like U.S.—have presence across sectors. So, we are not like Brazil, which is only in commodities, which is only oil and gas. Or China, which is now completely government-owned, even the digital companies are government owned. In India we have presence across sectors. We have great financial services, I.T., pharma, infrastructure, cement, steel and this is a country which has grown because of entrepreneurs. Government at best, doesn't interfere, it is fine. But it is basically the entrepreneurial spirit which has led to India growing even in 2022 at 7% when the world was struggling to grow even 0%. I think in India, yes, there are always going to be challenges and the challenges also become opportunities. The good thing is that, you know, challenges will remain, but a lot of these challenges are being addressed very decisively.Digitisation has not only led to efficiency, but it has also led to a lot of cleaning of the system. In terms of more transparency, we have tax collection, which has gone up 20% not because the country grew at 20% but because now there is more transparency and very limited opportunity for someone to not basically heed to the laws of the land.And as I said, in consumption obviously, there is huge opportunity. But consumption does not only mean the staples or the discretionary consumption. Consumption also means, you know, there is now I would say residents and population demands that they want good infrastructure. Yes, that demand is a little slow to fulfil. But we now have more airports and more people are flying. On a daily basis, four-and-a-half lakh Indians are flying, which is significantly higher than even the pre-Covid levels. And when we took the Vande Bharat a few days back, we were pleasantly surprised by the efficiency of the train and the comfort also. So, roads are pretty much there. You know, I have heard someone who went to Shirdi that once you cross Bhiwandi, reaching Shirdi is like a breeze and that new Samriddhi Road. So, efficiencies are increasing across (the board). So, I think without trying to say that this is the first opportunity, and this is the second opportunity, I think there are opportunities everywhere..Everybody has got a limited wallet. So, when you try and think of what opportunities could do really well, versus what opportunities could do well, but not as well.Sunil Singhania: From an investment perspective? When three of us are here, why do you need to do it on your own?.That is true. You don't take a small amount Sunil, that is the problem.Saurabh Mukherjea: Let me take it Niraj. I think Sunil is absolutely right. The country is getting linked like other countries, which have got networks, better roads, better planes, high-speed broadband, etc. Typically, when you link up a country, what happens is that the chhotta, local business guy suffers, because if you network a country the size of India, the world's fifth-largest economy, then the local player, the regional player, has to face up to the national giant. And we are seeing that consolidation of profitability in our country. When I migrated to this country in 2008, the 20 largest listed companies accounted for barely 25% of the country's profits. Today, the 20 largest listed companies account for 80% of the nation's profit. The largest listed company—now HDFC Bank—alone accounts for 8% to 9% of the nation's profits. So, this polarisation of profitability has many different layers to it, and the stock market layer is perhaps the easiest one to think about. To people like us, it sort of makes our life a little harder, unless you are able to back the industry leader. Whether that is in a big industry like banking, or in a small industry like emulsifiers, you have to work hard to back the industry leader, but you want to think about it on the nationwide scale. Millions of smaller businesses, which used to have a nice living because the country was not networked, will now have to reconsider their options. This is how countries develop. This is how America developed. This is how Japan developed. This is how Korea developed. This is economic development. You transfer productive resources from lots of chhotta, chhotta, low productivity firms to giant, efficient, highly automated, well-capitalised enterprises. I think that is a change we will go through. People like us will try to make money from it. But at the human level, it is a challenge that SMEs will have to face..Do you agree with this? Would the large become larger, is that the opportunity per se, independent of which theme it might be?Nilesh Shah: Absolutely. It will become bigger, but that doesn't mean that the small has to die. The small has to innovate. So, if you remember, some time back, Big Bazaar kind of shops came up which were retailing food grains and vegetables and so on and so forth. Everyone was worried that the Kutchhi kirana shops in Bombay will die. What did they do? They consolidated their purchases, they improved the distribution system. You can ask for a Rs 10 toothpaste, and they will deliver and today both of them are prospering. The same thing happened in Morbi’s tiles industry. People leveraged the raw material and focused on quality and design, and today Morbi is competing and dominating the tiles Industry in Southeast Asia. We were worried that Chinese tiles will come and destroy us. Now, Morbi is exporting not only to the Middle East but also to Europe. So, big will become bigger, undoubtedly for reasons which Sunil and Saurabh mentioned, but the small guys who are innovative, small guys who are able to reinvent themselves like Morbi tiles manufacturers, like Mumbai’s Kutchhi kirana shops, they will all survive and prosper and participate in India’s growth story..Sunil, any word here?Sunil Singhania: I think any economy, there is definitely consolidation, but businesses survive. And, if you actually look at some of the smaller companies, both listed and unlisted, if you look at the entrepreneurs, I think the josh is phenomenal. And it is not only the josh. Now, they have access to capital, which was not the case 20-25 years back; to raise Rs 1 crore, Rs 2 crore of equity was impossible. Now, any of these HNIs would bid Rs 10-20 crore by just seeing the presentation. And the other thing is the uniqueness of businesses that has also come up dramatically. Businesses which we never thought would exist, those businesses are coming up. And third, most important thing is these young guys now have world-class education. So earlier, when kids used to go abroad, 99% of them used to go with the thought process that they want a good job, and they will settle there. Now, maybe 20-30-40% are coming back and I think that is what is adding, that is why I said you know, India is a country which grows because of entrepreneurs. I think this small, small businesses do add and I think the ecosystem is good. As I said, capital is available. And for us to reach from 3 trillion to 6-7-8-10 trillion, it is not only going to be the large companies, but also the smaller companies (that will contribute). The other thing that we also have to realise is that you know, Saurabh mentioned HDFC Bank. HDFC Bank makes 8%-9% of the total profit pool because of the small, small businesses. HDFC is not into corporate lending. They are into SME lending. They are into retail lending and I think this whole ecosystem somehow gets captured and there is opportunity for everyone..Okay. It is interesting, because just before the event Saurabh was telling me that a sizeable proportion of their inflows into their funds come from smaller towns. So, there is money out there. Our next panel has Sanjeev Sharma of ABB, and he was telling me that sorry, but I don't come to Mumbai because most of the time, I am travelling to tier three, tier four places because that's where the real activity seems to be happening.Sunil Singhania: Hundred percent. When I started Abakkus five years back, we started meeting investors. I can tell you very clearly that the number of wealthy people in India is much more than any numbers can present or what any of us can imagine. And the kind of wealth, which people have, is again something that is unimaginable and more importantly now we have liquidity events. Now, some companies are getting listed, some are exiting, some are doing something. So, wealth is there everywhere..What is that one opportunity that you think is at the top of the mind for you in the coming decade or the next seven years? It could be an investment opportunity; it could be something that is happening in a particular sector that people should take notice of, irrespective of the listed investments or no out there.Saurabh Mukherjea: Positive change of the sort we have been discussing creates opportunities. Negative change also creates opportunity.And one aspect of negative change that all of us have to recognise is that climate change is upon us. So, every year we go through the cycle, we get very hot summers, and then we get floods in a specific part of the country. That is something that we are thinking quite deeply about—how it can become an opportunity. Now you know, I have tried with my colleagues to look for plays in the water sector. So far, we haven't been able to find listed plays on water. But increasingly, I am thinking that the best play on water perhaps will be food, because water scarcity most naturally turns into challenges in the food sector. Water scarcity has lots of implications, but one specific implication will be the cost of food. And that is something we are trying to think through as to how do we turn that into an opportunity. It is going to be a problem the world over.Even in Britain, water scarcity is becoming a problem. You would think rain stopping cricket match in England is the most common thing. But even in the UK, water scarcity is becoming a problem. In most of our cities in India, we are using water, which is actually from the water table. Mumbai is an exception. But in cities like Bangalore and Delhi, most of the water is actually drawn from the water table. As we deplete that, that becomes an issue and the translation of that into food prices is something we are trying to think of as an opportunity..Thank you Saurabh. And Nilesh?Nilesh Shah: The I.T. industry has created a lot of big businesses, a lot of value. What was the I.T. industry in maybe 2003-2004, is where the healthcare industry is today. About one-third of doctors in America and U.K. are made-in-India origin; 45% of medicine consumed by volume in U.S. is made in India. Today, if you want an American visa, the wait period is probably two years. But if you are a nurse, then the American Consulate General will be happy to come to your home and deliver the visa. And most importantly, the cost of healthcare delivery. A simple root canal for the daughter of a friend of mine in the NHS in U.K. was six months waiting period. In private, after paying £1500 was two months. Yeh friend ne seethe aapne beti ko kaha, beta plane lelo. Yahan pe aa jaao. Yahan pe raat ko 12 baje aap ki root canal mein kara sakta hoon. And it happened probably at Rs 10,000-12,000. Now, the world is ageing; there is no doubt about it. The lifespan is increasing; no doubt about it. And most of the healthcare plans are unfunded. What will the world require? They will require a healthcare company from India which will provide solutions, through medical professionals, through medicines. And like we have seen the I.T. industry in India, which is onsite as well as offsite, and which provides competitive solutions to the world, the same thing will happen in the healthcare industry. The world will require Indian healthcare companies to succeed, so that they can live longer. Punya ka kaam karenge, paisa bhi ban hi jayega..Sunil?Sunil Singhania: I will again go back to where I started from. So, if you have 50 crore of people who can afford things who touch 100 crore, and the super-rich multiplying 5x in the next 7-8 years, I think discretionary consumption is the place to be. And I am not talking about consumables like staples—where there is already penetration—but the discretionary spend. I think it will surprise all of us. If you look at the size of the largest garment company, the largest shoe company, the largest XYZ company in India, it would be the smallest company in the U.S. in that segment. The size would be that much. And as I said, you don't have to do any significant research. You just go and look at the largest company in any consumption play in China, or U.S., or some of the other countries and compare it to the size of the largest company in India, you will get the answer. Now, we have 140 crore people. The largest sanitaryware company is not even Rs 1,000 crore. I think the size of opportunity in the discretionary consumption side is going to be huge. Obviously, India is a very difficult market to make money. What is good is very expensive, including ABB, which is sitting here. So, I think there are opportunities across. But since you said only one opportunity, the market is an opportunity. But this is very clearly visible. I remember when I was young. We used to get two shirts during Diwali. And we were three brothers. So, most of the time, the shirts looked the same, as they were made from the same cloth. Now we buy shirts on the go. I am just giving you a perspective. We used to have one pair of shoes—shaadi mein bhi wohi, office mein bhi wohi, kidhar bhi jana wohi shoes. Now we have different outfits for different occasions, different shoes for different occasions. I think the whole consumerism is going to drive (the economy). And I think people have started to spend. That is a fact of life. So, it is a multi-year opportunity. Obviously, I think the shares at the right valuation is a challenge but if that is one of the things, then that is the opportunity,.Audience: So, since China is opening up, how would it impact Indian economy, especially the chemical sector per se? Since China has been dumping products, there has been headwinds in the chemical industry due to it.Saurabh Mukherjea: China has been open after Covid for a year or so. The challenge for China is that they have gone after their own entrepreneurial class. What we used to do in India in the 70s and 80s, China is doing now, by going after Jack Ma, by going after the tech entrepreneurs. They have scared away venture capital money, they have demoralised their own entrepreneurs.Secondly, by taking a belligerent attitude vis-a-vis the western world, specifically America, they have made sure that America and the West have stopped exporting to China, critical products in the tech sector. That is going to send China's tech sector backwards very quickly. That same belligerence has resulted in people like Tim Cook coming to India and saying that a quarter of Apple's smartphone production is going to move to India. That same belligerence is resulting in western pharma companies who buy something like $200-billion worth of active pharmaceutical ingredients from China saying that they want to reduce their dependence on China. So, China's problem is not the Covid opening up or of lag thereof. They have been open for a while. They are committing what we did in the 70s and 80s, which is showing aggression vis-a-vis the western world, persecute your entrepreneurs. That is the surest way to kill a booming economy..Audience: Saurabh, you mentioned a negative change— climate change—which could be an opportunity. But I just wanted your views on the fact that wouldn’t climate change also mean destruction of overall value? Like in case of floods or rising water level, might it not actually have major detrimental effects on the Indian growth story?Saurabh Mukherjea: Climate change, globally will have myriad effects. I am not so sure that I am the right person to understand those. And with the limited context of my investment activities, and the limited context of what I do, our job is to look for opportunities from climate change, specifically the water aspect is becoming very clear. I think most people in this room know that cities like Bangalore, states like Karnataka and Tamil Nadu tend to take a very belligerent attitude vis-a-vis each other on water. So, water scarcity and the impact on food is something that we tried to see if we can turn that into an opportunity. Climate change is a massive subject. You have got experts, who are trying to figure out how that will impact the world. I don't think I can even begin to understand the pros and cons of the broader issue..Audience: So major risks over the next five-10 years, you know, in the backdrop of the fact of the past two years, apart from Ukraine and thereafter China plus one. Consumption has been stagnant.Nilesh Shah: Consumption has been showing K-shaped movement. You and I are consuming more than Covid and it is visible. But our drivers, our maids, our accountants, our peons, our watchmen are not consuming as much as before. Well, there are multiple reasons, which have come together to do that. I will list some of the factors that are responsible for lower consumption according to me. However, this is just my analysis.If you know trading, post Covid a lot of people came into F&O trading by anecdotal experience. We knew that only people in Kailash Plaza were making money, and outsiders were losing money. For those of you who don't know what Kailash Plaza is, it is a shopping centre in Ghatkopar. It has more turnover than many of the states like UP, Rajasthan, Jharkhand, and Chhattisgarh put together. Now, SEBI research has confirmed that 89% people who trade in F&O lose money. That number could be easily between Rs 50,000 crore to Rs 75,000 crore.Interest rates have gone up. In many cases, housing loan tenure has been extended. But in many cases like in personal loans, repricing has been done. Collectively, they would have taken away anywhere between Rs 50,000 crore to Rs 1,50,000 crore, if not from a cash flow point of view at least from a psychological point of view.Look at rentals, the rich guys own flats and the middle income or poor people stay in those flats. Rental costs are up 20% on a 6-lakh crore rental market. That is Rs 1,20,000 crore drawn from the pocket of the poor to the rich. There are multiple such reasons why consumption at the bottom end of the pyramid is not growing. Now, one solution was to capture China plus one opportunity and here we have made the beginning, but the job creation is more in casual and contractual workers than in permanent employees. So, we have a challenge of consumption. But hopefully, slowly and steadily, we will find solutions to all these things, which are hurting consumption at the bottom of the pyramid and things will start improving over a period of time..Audience: My question is to Nilesh Shah. You were talking about a self-goal. There are a lot of self goals in the political system. The way it is happening, in Punjab and Karnataka, luring voters through freebies. Already, India is spending a lot of money in terms of social welfare schemes, be it free food to the needy people and other things. But on top of it, we now have freebies which are swinging the whole electorate mandate. Now, this is something that can put a major dent in our financial system. Now, is this factored in and what is, especially since you also are there in the Prime Minister's Economic Advisory Committee? Just wanted to know whether this has caught attention and whether there is something that you think is a challenge that we would see going forward?Nilesh Shah: Your point is absolutely valid. We have seen what freebies culture can do to an economy like Venezuela. They have more oil reserves than Saudi Arabia, probably less population than Saudi Arabia and in about two decades they have grown to be the poorest nation on Earth. That was all Hugo Chavez’s freebie culture. As I mentioned, we should not score self-goal and one big fear for India is how do we maintain balance between inclusive growth where everyone gets roti, kapda, makaan and at the same time, not create a culture where people don't have to work. We have to give some subsidies for roti, kapda and makaan. We can't have social stability unless everyone has food and some amount of clothing and some amount of shelter. But then, when do we not cross the lakshman rekha? In Ramayana, we have seen when even Sita mata crossed lakshman rekha you know, there was problem. We have to maintain our lakshman rekha. I hope and pray that as voters, we will ensure that lakshman rekha on our politicians. In the past, we have seen many politicians who have walked left and talked right. They have repackaged existing freebies to show as if they are doing something new. Let us hope and pray that our politicians' ability to walk left and talk right and our voters' ability to enforce lakshman rekha will help us from not scoring a self-goal..Audience: This question is to Saurabhji. As an investor, what could be the top three anti-thesis, which an investor should keep track of? A low probability, which if triggered, can lead the entire thesis to go down the drain.Saurabh Mukherjea: Top three anti-thesis. The first thing to look out for is, tax policies. Nilesh bhai talks about self-goals. Every time the budget comes around, I kind of hope and pray that the government doesn't do anything on tax policies with the retrograde. I have to confess, the TCS thing worries me a lot. They have pushed it out l think on 7th October or something. They pushed out the TCS ramp up to October, but it just doesn't feel very comfortable that when you travel abroad, or you invest abroad, you pay 20% TCS. Now, thankfully, TCS has a modest outlay. But when the post-election budget in July 2024 comes around, I think we should look out for the tax piece because GST is such a game changer. GST leaves so little for the tax department to do. You worry whether they carry on sort of doing TCS plus, plus. The second thing, I will say look out for the K-shaped recovery, which in a way is one manifestation of the fact that the North and the South of the country are pulling in divergent directions. The South is booming. It will do even better in the years to come. It is not just I.T. services, their manufacturing, manufacturing of electronics, chemicals, pharma, the whole pieces around Chennai, Hosur, Pune, Maharashtra, and also Gujarat to some extent will do well. I am not so sure what exactly will happen in the North, which is going to give the North that level of prosperity. What it does to India's future economic cohesion is something that I think we need to look at quite carefully.And, the third anti-thesis is just the sheer amount of foreign money that is going to come to India. My reading is, we are going to be inundated by foreign flows. … The Chinese investments, at 10-year CAGR would be 3% or 4% in dollar terms. FPI invested in India is $0.6 trillion; one-sixth of the China corpus is the Indian investment. The Nifty itself 10-year dollar return will be 11%-12%. On top of that, with the growing escalation of hostilities between America and China, I think we have got a classic recipe for a FPI driven bull market. And potentially, a bubble in the next couple of years, which is something we need to look out for carefully. If you get the bubble and the tax policies become a little difficult and the South booms economically while the North doesn't, you have got a combination of risks that could be quite tricky to deal with..Anything that stands on top of mind as a risk?Sunil Singhania: I think 2024 elections are there. Obviously, it is going to be something that is going to be very keenly watched. And, the other thing, at least in my experience over the past 25-30 years is that big corrections have happened in the markets on events that we never anticipated—whether it be Covid, Russia, or Ukraine. There may be risks that we don't know as yet.

The India Opportunity: Sunil Singhania, Saurabh Mukherjea And Nilesh Shah On What Lies Ahead

Three of India's top investment managers pick factors that will drive India's growth and what's the biggest risk.

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