Why PineTree Macro's Ritesh Jain Is Betting On India Manufacturing Boost

Manufacturing contributes just about 17% to India's GDP, despite government measures such as production-linked incentives. Still, PineTree Macro's founder Ritesh Jain expects that a change is in the offing. The success story of the electronic 'assembling' sector is widely chronicled. The second success story in assembling, happening currently is in 'toys.' Both stories have one thing in common—these are labour-intensive industries, with very low technology input, said Jain, while responding to NDTV Profit's questionnaire over mail. .But why has the share of manufacturing not seen a rise? The reason is that we are starting on a very small base, as China (and other countries) largely decimated our industrial base and those scars could take some time to heal, Jain says. However, a very important vote of confidence for Indian manufacturing comes from probably the biggest investor in the world i.e., Japan, he said, referring to a survey on expansion plans by the Japan External Trade Organisation. 75.6% of the survey's respondents have shown interest in expanding to India over the next 1-2 years, it showed. "So, things are changing, it is just that we are not able to see them in numbers as yet," he said. "I am confident that the manufacturing share of India’s GDP will start getting noticed in the official statistics in times to come.".Within manufacturing, what sectors do you bet on? What about the roadblocks that manufacturing in India continue to face?Ritesh Jain: I am betting on what the government is betting on. The Indian government is very clear on its priorities which is laid out in the Viksit Bharat vision, but to put it simply, job creation is a priority for government. Let’s start with government priority and global tailwinds for India.I would say the best macro theme to play for job creation in India is the tourism sector because there is no other sector which can create as many jobs as the tourism sector. Basic infrastructure, including airports, are getting built in India as one of the ways to attract tourists. India is not short of religious tourism/vacation tourism or even medical tourism places but without infrastructure it is of no use. There is an added benefit of foreign exchange earnings, which is net negative for India till now..The other sector which I am very bullish on is the electrification ecosystem and energy transition. Without adequate and cheap energy to drive manufacturing growth/data centres/AI demand/EV, the dream of economic growth and rebalancing will not be complete.All renewables have one thing in common is that they are intermittent energy sources unlike fossil fuels, and they require massive investment in grid ecosystem to stabilize and harness this energy. Hence, electrification of grids is a micro theme in energy transition..The basic precondition of a manufacturing-led growth is good Infrastructure, and as one economist told me that if you make roads then growth will come, so here is one more chart for you on infrastructure build-up in India..Yet another theme that you appear to be bullish on globally is the demand for energy and electrification. How do you see that playing out for India?Ritesh Jain: I am going to quote a statement here from the Hitachi India CEO:“India’s sheer size and its huge scope for growth means that its energy demand is set to grow by more than that of any other country in the coming decades. The backbone of today’s electricity systems, grids are set to become increasingly important as clean energy transitions progress, but they currently receive too little attention. To achieve the countries’ national energy and climate goals, the world’s electricity use needs to grow 20% faster in the next decade than it did previously. In India, it also means adding an equivalent of the European Union’s entire existing grid by 2040.So, the entire grid ecosystem, which will help in increasing the electricity output—whether it is electric cables, transformers, electric meters, copper and so on—are part of our ‘Electrification” ecosystem. What you will notice is that I have not mentioned chasing renewables because there is enough money chasing renewables, but nobody is looking at how to take this energy and put it on grid for use..What’s your outlook on metals? Do you think the current rally seen in some metals will persist, going forward? Ritesh Jain: I am bullish on both precious metals and base metals. Gold is entering the world monetary system as neutral reserve currency and what that means is gold is getting delinked from dollar. Below is the chart of US real yield and gold. It makes sense that when US dollar real yield rises, then gold should fall, because gold neither pays interest nor pays dividend. Since the 2022 Ukraine-Russia war, however, gold has stopped reacting to changes in real yield. The reason is that after G-7 confiscated Russia’s FX reserves, countries are losing trust in the US dollar and instead increasing holdings of gold, which cannot be confiscated if it is within your jurisdiction..I am also bullish on base metals, not because of the China stimulus, but because base metals like nickel, copper and aluminium are extensively used in energy transition. It is a classic economics 101 problem of rising demand and stagnant supply, which can only lead to higher prices till supply catches up to demand..Thematically, what are the other sectors you are currently betting on?Ritesh Jain: I am bullish on electrification, defense tech, tourism and wealth management in India..Out Of The Woods: Rural Economy Is Showing Signs Of Recovery, Say FMCG Firms

Why PineTree Macro's Ritesh Jain Is Betting On India Manufacturing Boost

Jain is also bullish on electrification, defense tech, tourism and wealth management in India.

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