A slew of factors has now ensured that India stands at a confounding economic crossroad. Can it find the right way?
A BACKGROUND BRIEF
After the pandemic had caused havoc & made the world wary of China, many experts had opined that the "China +1" strategy (wherein the global supply chain would reduce its dependence on China, the global manufacturing hub) would greatly benefit India. And why not. Peninsular India was close to China The economy had a huge & emerging consumer class to support local manufacturing bases. Government Policies like the sector-agnostic PLI schemes & "Atmanirbhar Bharat" were welcoming foreign manufacturers.
However, things have not panned out as envisaged.
It seems like we are going backward & de-industrializing!
India's notorious red tape (license & grant delay) continues to shoo away investors.
Although India's workforce is large, it is unskilled to a great extent.
Industrial infrastructure (like road & power) remains a major problem.
The incessant hike of import duties is making manufacturing more difficult.
The thing is that India can't compete with the low labor cost of Vietnam & Bangladesh, the world-class manufacturing facilities of Japan & South Korea as well as the business-friendly taxes and policies of Singapore, Indonesia & Taiwan.
The table below will portray how ASEAN &Japan are the real winners of the China Exodus
Source: Business Insider
Another recent report by the New Indian Express has pointed to the same dismal conclusion.
So what can India do to beat the competition?
My suggestion would be simple If you don't want to be a small fish in a big pond, be a big fish in a small pond instead. What I mean is instead of targeting whole sectors where competition is rife, we can build an ecosystem for certain sub-sectors which have one or more of the following features:
labor-intensive
futuristic & critical tech-driven
less competitive
SECTORS
Some niche sectors which we can target are listed below:
Semiconductor Design
As you might have heard by now (unless you live under a rock), the world has been dealing with a never-ending semiconductor shortage for over a year now. The main reason is the sheer complexity of fabrication & the long supply chain that this omnipresent tool has. While we can't dream of having world-class foundries like TSMC or Samsung, we can certainly be the next hub for its R&D. Apart from having tons of quality engineers, we seem to have a solid track record. In fact, the Indian of Samsung seems to contribute massively to its Exynos Chip designing & contribute around 25% to the division's topline. The designing of semiconductors alone is an industry
India can invite industry leaders like Nvidia, AMD & Intel to set up shop in India by setting up design parks with low taxes & focusing on developing more skilled talent. This way we can contribute to a certain extent to the global supply chain of a vital modern component that is used everywhere. The simple fact is that this is a trillion-dollar industry & no single nation has end-to-end capabilities Hence, India can swoop in & grab a pie with proper execution.
Source: McKinsey
Specialty Chemical
China is forcing a major clampdown on its chemical industry The main reason is the poor environmental impact & depreciating standard of living. For a nation that has millions still below the poverty line, the growth vs life quality debate is too snobbish to be a reality.
The Specialty Chemicals space has usage in a host of ancillary industries like automobiles, construction, textile, plastic, electronics, waster, and water management, etc which makes it an appealing sector for a massive country like India. Plus, unlike the general chemical sector, the major layers here have IP protection through patents of chemical permutations & combinations. Players like Aarti Industries, Deepak Nitrite, Heranba Industries & Clean Science and Tech are poised well to capture the incoming CAGR of 12%. A proper PLI scheme & boost in industrial infra can improve India's prospects in this sub-sector & contribute massively to the exports.
Animation of the AVGC Sector
AVGC stands for Animation, Visual Effects, Gaming & Comics. It is one of the fastest sub-segments of the Media & Entertainment Industry. India's animators have been known for their quality work & commendable contributions to the works of major global studios like Disney, Warner Bros & Sony. Interstellar, Game of Thrones, Maleficent & Madagascar 2 are some names where Indian animators have contributed substantially.
As per a study by the BCG, this sector can grow with a CAGR of 25% till 2025 Right now, the entertainment industry is in the doldrums due to the pandemic. With our cost efficiencies & quality work, Indian animators can make a name for themselves. Already, Karnataka & IIT-Mumbai have taken a solid leap with proper support. It remains to be seen if the Union Government can do the same or not.
Agritech
How can we be so dismissive of a sector which employs more than 50% of India's population? Agritech is a real opportunity to actually change the lives of millions by empowering the annadaataa (farmer) to be truly efficient. There are many nascent startups that are working on weather forecasting, soil betterment, planned cultivation, IoT in agriculture, drones & satellite, vertical farming, hydroponic farming, and Agri supply chain that can substantially boost the per capita income of our underpaid farmers by a huge extent
The government can truly channelize private funding in this area by nudging VC capital with incentives & setting up incubation centers through IITs. The rise in productivity by leveraging technology could be so huge that it can usher in Green Revolution 2.0 in ourcountry.
WHAT YOU CAN LEARN
In the face of intense competition in today's India, we too need to build our own niche skills like the Indian economy to stand out from the crowd. For example, if you want to be a digital marketer, you can start by learning technical skills like Search Engine Optimization, Video Editing, Data Visualization, and other such hard skills which will at least enable you to gain proper exposure. Identifying niche areas & fortifying them from the competition by learning skills can be a great step for your career.
Even in stock-picking, you can pick companies that are real dominators in small categories like Marico in Coconut Oil, MoldTek in Rigid Packaging & APL Apollo in structural steel tubes. (Fair disclaim: this is NOT investment advice, It is for educational purposes only).
Even for students like me who are yet to enter the workforce, upskilling on hot tech trends like blockchain or moment marketing can be a real personal moat.
That's it, people.
Thank You so much for tuning in to this write-up.
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