India in 2020

Everyday, I oscillate between exhilaration and despair.

The market opportunities are evident. The energy, optimism, and passion of all Indians is infectious. The collective ambition to re-gain our rightful place in the world economic order is truly inspiring.

Yet, its hard not to despair. The infrastructure is abominable. The poverty and depravation is gut wrenching. The way the middle class treat their staff (maids, drivers, etc.) is inhumane.

Furthermore, the contradictions are inexplicable.

  1. In a country where incomes are 1/50th of the US, prices are mostly higher.  Yes, apples for apples, almost everything is more expensive in India.
  2. The Indian Administrative Service (IAS) attracts some of the brightest minds in the world, and yet our bureaucracy is our worst enemy
  3. Dr. Manmohan Singh, our prime minister, is an educated and erudite man who many regard as “the model of what a political leader should be”. And yet, our politicians are vile, uncouth, incompetent and corrupt.

Amidst all these dichotomies, the trajectory is irrevocable. In our lifetime, India will once again account for over 20% of global GDP, similar to India in 1700 and the US today.

In fact, in just 10 years,

  1. India will be the 3rd largest economy, with 1.5 B people of which 400 M can be considered “middle class”, and 500 M+ will live in urban areas.
  2. The NCR (Delhi and its surrounding towns) becomes a global metropolitan hub with 25 M + people and world class infrastructure. In all, there will be 100 + towns larger than San Francisco (~ 1 M pop.) all connected by 4 lane highways.
  3. There will be 10 (vs.3 today) world class international airports and 50 + (vs. 25) domestic airports.
  4. India will be the 3rd largest global hub for defense, aerospace and power equipment, the global hub for small car design and manufacturing and the 2nd largest global hub for ship building and repair.
  5. Every Indian will have a UID (vs. none today), 400 M + will have a bank account (vs. 75 M today),
  6. 300 M+ will have access to electronic fund transfer (vs. 10 M today) and 250 M + will have access to credit (vs. 15 M today). As a result, India will have 2nd largest electronic payments volume (after China), the 4th largest credit economy ($ 2 T +), and 5th largest market for insurance.
  7. India is already a huge mobile market. By 2020, it will be the # 1 cell phone market globally with 1 B + connections, the 2nd largest no. of broadband users (400 M+), and the 5th largest market for IT products and services.
  8. Bollywood already makes more movies than Hollywood. In 10 years, it will be the 2nd largest entertainment hub exporting movies, music, and fashion to the rest of the world.
  9. Indian companies are already global leaders in IT services. By 2020, several Indian carriers will be global players (e.g. Bharti, Reliance, TATA Telecom), 4- 5 Indian banks will be in the global 25, and TATA Motors will be a top 10 global automotive company.
  10. India is a land of entrepreneurs. Over the next decade, fueled by growing local markets, access to capital and growth in higher education (e.g. 10,000 engineering PhDs annually vs. 1000 today), India will produce its very own Google, a start-up that creates over $ 100 B in value.

In 10 years, I hope that despair will be a thing of the past, and we will all wake up exhilarated very day. In 10 years, I hope that we will all come to regard Hans Rosling’s predictions as incontrovertible.

About Ashu

General Partner with Foundation Capital. Areas of interest range from digital media, mobile and internet infrastructure to all things related to India. Currently on the board of TreeHouse, Aspire, Conviva, Agni and TubeMogul.
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10 Responses to India in 2020

  1. Ashu: fabulous post year-end post. A great time to reflect on the opportunities and challenges ahead. I seem to agree with nearly everything you say except perhaps the predictions on #5 and #6. And while there is no question about some of the despair, the feeling of being a (small) part of the macro trends that you laid is exhilarating.

    A few comments:
    1. On India being more expensive than the US – could not agree more. There are of course many examples from personal life but the one business example that sticks out is the “cost of collections”. I will readily admit that this was something that was not even on my radar screen when we started Canvera and in fact when some VCs asked us about this, we did not take it seriously. But I can tell you today that the 1-1.5% visa/mastercard charges seems so juicy and I’ve come to appreciate in a very deep way why visa/mastercard are such valuable businesses and how much their success helps the economy overall. In India, lack of trust in anything but face to face transactions makes it imperative for companies to set up a physical network whose one very key function is collections. The way to look at this and look at many other “infrastructure” issues in India is that there is a very high fixed cost to set things up and then AFTER achieving SIGNIFICANT scale do the variable costs become reasonable. The price paid is not just the investment in the fixed cost, but also the time taken to set things up. The “Angel Bubble” in internet/mobile companies in the US is particularly aided by the fact that a lot of products and services can be bought by startups in a purely variable cost model with no upfront fixed costs (i.e. cost of COMPREHENSIVE experimentation has gone down). And it is not just a question of technology, there is also an underlying basis of trust in law enforcement, good business practices etc that play an important in making this happen. India is very far from that today. And that makes India expensive.

    2. I can’t believe the numbers in #5 and #6, in particular UIDs for all citizens and 300M+ having access to electronic fund transfers. UID: My skepticism comes from dealing with India’s premier courier company Blue Dart and seeing the issues they are facing in scaling up to beyond the 200-odd cities they service today: infrastructure, hiring, government, pilferage etc all come in the way. And UIDs will require a 2-way distribution, data coming in and physical cards being delivered back. Maybe half the population in 2020 will have UIDs – I can’t believe in more. And then for electronic payment methods, the key element missing is “trust”, not laws, not investments, not ideas, not business will, but basic simple trust in businesses (today even big brands “cheat” consumers as a matter of practice), basic simple trust in law enforcement (where do I go, say, if my credit card is misused). It is an EXTREMELY big mindset change (something that I’ve only appreciated having had the luxury of being a consumer in both the US and now in India) to use electronic payment methods and requires a lot of “infrastructure” related pieces to fall in place for this to happen at scale. I found it fascinating to read this article in NYTimes which says that in the US 27% of payments is still through cash.

    Whose right or wrong only time will tell; what is clear however is directionally where the economy is going and that there are a plethora of opportunities to meaningfully participate in that. And that is unquestionably exhilarating!

    Happy New Year!

  2. Jiffy says:

    Great, and what gives you an idea that while india is marching forward, other economies will stand still.

    The real progress also lies in our civic and societal issues:

    – india will still live with substantial level of corruption. Attitudes take generation to change, and some times require strict zero tolerance policies, which are not easy to enforce in a democracy

    – cleanliness and hygiene. It is still pitiful to see open sewers, lack of public toilets even in the midst of prosperity. Major deliberate effort is needed to solve this issue, and we don’t see that

    – care of elderly and helpless. We may believe respect our elders more than the western societies, but we definitely lack elder care facilities, assistance and respect for mentally challenged. A society is known for how well it treats it’s most helpless members, and india ranks way below in this regard, and is going to get worse because this has nothing to do with GDP growth, but more with major changes in attitude.

  3. Neeta Jain says:

    Hi Ashu, I found your blog through Renu’s facebook. Wonderful post! I couldn’t agree more with your thoughts, but I do think that removing corruption and inducing civic sense, and respect for fellow citizens will take a lot longer than 10 years.

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  4. Pooja Malik says:

    The explosion in the auto market will be the single largest change, IMO. China’s auto market is already larger than the US and will remain so, but Goldman Sachs predicts that India will see the biggest increase in the next decade with annual auto sales quadrupling to over 8 million units per year by 2020. The Chinese market will grow to 30 million units by 2020, from abt 17 million currently.

    More broadly, China’s consumer will dominate over the next 5-10 years, but per GS, India could overtake Brazil to become the second largest BRIC country in terms of consumption. The rise of the Indian consumer will create lots of opportunities including the ones you highlighted like mobile. These opportunities are a manifestation of the underlying trend i.e. that a whole new category is being created, the middle class, whose population which will be larger than several countries today.

    • Auth says:

      Hi Paige. I am glad you like the rangoli patnerts. Children make these wherever we go by using coloured powder on the floor. They are really beautiful. Also at our hotel, everyday they fill a pool with petals in a particular design, which is beautiful. I will put a picture of this on the diary page. Indian sweets are lovely. My favourite are Pista Burfi which are fravoured with pistachios and Ros Gular (I’m sure I haven’t spelt these right!) which are a sort of very light, sweet cheese. They are all very tasty but they are really filling and probably not very good for you. They sell them in lots of the shops on the Belgrave Road in Leicester. Do you remember when we went for our trip there we tasted some? The sweets in India are the same.

      • Supercuts says:

        The concept of “peak oil” and “global wamnirg” is not talked about very much in major media in the U.S. because it doesn’t help you sell the latest gizmo from China. Our media is way too perky for my tastes. As ocean levels rise and climates change, there will be crop failures, human displacements and starvation in poor countries.The Western standard of living will be hurt as we reach the peak of oil production/capacity world-wide. We still rely on fossil fuels for about 86% of US energy needs, and of course just about every tangible product and even food crops (fertilizer & transportation) rely on oil production.The irony of all this is the fact that most major businesses and countries realize the phenomenon of Peak Oil and Global Warming and they are positioning themselves to take advantage of it. The passage North of Canada will open up and has already been a point of international controversy.We’ve had the internet bubble, we’re experiencing the downside of the housing bubble. The latest issue of Harper’s predicts the rise of the green industry bubble, which will help keep the economy going until it too bursts.

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