Read on Twitter
Long thread on the bull case for India 2020-2030
Areas covered- food/water, energy, roti-kapda-makan, trade, software tech, market valuations, effects, risks
1
Areas covered- food/water, energy, roti-kapda-makan, trade, software tech, market valuations, effects, risks
1
#1 food/water
Meat consumption- which takes far more water than veggies, is far lower, healthy balance, wont rise to US/EU per capita level. So no water shortage. Artificial meat will lessen the resource drain even sooner.
2
Meat consumption- which takes far more water than veggies, is far lower, healthy balance, wont rise to US/EU per capita level. So no water shortage. Artificial meat will lessen the resource drain even sooner.
2
#2 energy, homes, sanitation, digitalization
electricity coverage is ~100% now, jan dhan and digitalization pushed it. The exponential growth S curve is done. Same for electricity. Load shedding down. Renewable capacity has gone up 5x in 5-6 years. Growing @ same pace
3
electricity coverage is ~100% now, jan dhan and digitalization pushed it. The exponential growth S curve is done. Same for electricity. Load shedding down. Renewable capacity has gone up 5x in 5-6 years. Growing @ same pace
3
#3 internet
In one word- Jio. Cost of data is >90% cheaper than DM countries. Most of the population has access to Youtube, social media, and can absorb and assimilate tech and global culture. Will catch up far sooner than other Asia due to English.
In one word- Jio. Cost of data is >90% cheaper than DM countries. Most of the population has access to Youtube, social media, and can absorb and assimilate tech and global culture. Will catch up far sooner than other Asia due to English.
#4 trade
India's big net imports- energy oil, coal, consumer electronics, gold.
Lot of oil is imported for refining and reexported. Oil will stay low permanently, far below the last decades’ $100. $50 at best on average, or far lower. Gas prices will also be low.
5
India's big net imports- energy oil, coal, consumer electronics, gold.
Lot of oil is imported for refining and reexported. Oil will stay low permanently, far below the last decades’ $100. $50 at best on average, or far lower. Gas prices will also be low.
5
Electric vehicles- big unknown, its timing can make a big difference. Battery cost /kwh is $150, falling at 20%/y for last few years. By 23, it’ll be ~$100. EVs will be far cheaper to buy, run than oil. All auto cos today are experimenting, in 5 years, they should hit the road.
6
6
Incremental demand from EV instead of ICE puts a lid on oil demand by 2030. Similar transition underway in other major auto markets- US, China. Battery capacity coming online in next 3-5y is 10x+ of present driving cost lower. exponential S curve growth coming
7
7
Gold imports as investment will be cut with sovereign gold bonds/ financial paper gold options + low inflation going ahead.
8
8
Apple+ bunch of other assemblers shifting production to India, around $30b/year of exports in 5 years. Samsung has already localized quite a bit. Thats almost 10% of total current exports.
9
9
Spillover effect of localizing tech skills in manufacturing + economies of scale should lead to onshoring of other stuff- TVs, computer peripherals, etc. Eventually, chip fabs for processors. (this is the hardest bit, needs GOI push).
10
10
Coal mining opened to private players- should lead to greater output and lesser imports.
11
11
# 5 exports
major items are - Software exports, agri, rest is evenly distributed among multiple categories.
Software exports have continued to grow for decades. Despite the decline of old IT, still has the talent to move up the value chain.
12
major items are - Software exports, agri, rest is evenly distributed among multiple categories.
Software exports have continued to grow for decades. Despite the decline of old IT, still has the talent to move up the value chain.
12
Next wave won’t be outsourcing but offshoring. Netflix doing visual effects, Uber building out engineering and backend, AWS, etc are all product companies, not tech support. Outside of Bay Area/NYC in US and Shenzhen, Bangalore is probably the high density for tech chops
13
13
Local competition is as good/better than foreign- Swiggy, Zerodha, Phonepe, Flipkart, Curefit, Byjus, Freshdesk, Zoho, Ola,etc
Local cos have a big edge in cost- salaries and exchange rate. Once local markets saturated-almost there, will expand abroad. Already in SE Asia
14
Local cos have a big edge in cost- salaries and exchange rate. Once local markets saturated-almost there, will expand abroad. Already in SE Asia
14
India is the last open market that foreign cos can compete in, but also means Indian cos can compete in their markets.
Software exports will zoom in a few years, imports will drop as cloud infra, data providers etc get localized.
15
Software exports will zoom in a few years, imports will drop as cloud infra, data providers etc get localized.
15
All of this sets the stage for a structural current account surplus, if not trade surplus.
This is before counting the increased inflow from investors buying equities/debt as allocation weight increases globally, and FDI into manufacturing/services.
16
This is before counting the increased inflow from investors buying equities/debt as allocation weight increases globally, and FDI into manufacturing/services.
16
A trade surplus, low inflation ( from lower energy costs), fast rising consumer disposable income is a catalyst for a big boom that will last several years at the least, but more likely for a decade or longer.
17
17
4% inflation + 7-8% real growth= 12% nominal GDP growth -> 15-18% eps growth for listed cos. (on average over a full cycle) for ~10 years. This takes earnings/share to 4x.
18
18
If PE remains @ ~30, stock market cap should go up 4x. If PE expands, then even more. So approximately 40k on $Nifty.
If we assume this is too optimistic and deflate growth by 20% total, still makes around 30k on nifty.
19
If we assume this is too optimistic and deflate growth by 20% total, still makes around 30k on nifty.
19
At constant INR, 10 years of 7% growth gets you to $6.2tr, 8% gets you to almost $7tr.
US rates are 0, wont go up for a decade. DXY depreciation over the decade should bring the needed inflation of 3-4% to inflate away corona+ 2008 debt pileup
20
US rates are 0, wont go up for a decade. DXY depreciation over the decade should bring the needed inflation of 3-4% to inflate away corona+ 2008 debt pileup
20
So real rates in USD -3%. India inflation ~4% + rates 5-6% so real rates around 1%. INR should appreciate around 1 - (-3) = 4% per year.
That takes USDINR back to 46 in 10 years. GDP in USD terms to $9 trillion with real growth @ 7%.
21
That takes USDINR back to 46 in 10 years. GDP in USD terms to $9 trillion with real growth @ 7%.
21
Too optimistic? Perhaps. China grew at 11% real + fx appreciation in the 2000-2010 decade through exports. India can do 7% from domestic consumption.
22
22
Markets, as always, overshoot and undershoot on both sides. If usd growth goes to 11%, inflows will rocket and nifty will exceed far above 30k. When the boom ends, the crash will be equally severe. That exact path is unknown and price action will be a better guide.
23
23
Complaints like India doesn't have its own tech platforms, military industrial complex, etc will not really be an issue if your domestic market is large enough. Its the only one outside of US and China which has the potential. No reason why it cant happen
24
24
Risks- as always, many.
Political reset every 5y after election that reverses course- unlikely
economic harakiri- demonetization- possible
overt war with china/pak- unlikely
oil px spike to 100 due to M.East unrest- possible
biggest risk is own govt doing stupid things
25
Political reset every 5y after election that reverses course- unlikely
economic harakiri- demonetization- possible
overt war with china/pak- unlikely
oil px spike to 100 due to M.East unrest- possible
biggest risk is own govt doing stupid things
25
Overall, ignore the noise, and as long as we get the macro right, the smaller problems will take care of themselves. Compiled this from a bunch of conversations from April. Im bullish, and will remain till the macro changes. Check back in 2030 :)
26/26
26/26
further reading- https://twitter.com/FrankBullit67/status/1292046991921491969
Lot of comments on the lines of -this is too optimistic because it assumes 7% growth.
Whats the growth been from 2014 to 2019 despite demonetization, gst, INR drop, NPA spike ? 6.8%
Whats the growth been from 2014 to 2019 despite demonetization, gst, INR drop, NPA spike ? 6.8%
Further further reading, good points on offshoring, agri reforms, supply chain and geopolitics- https://twitter.com/niravstoons/status/1292367100732817409?s=20
