How India can make this decade its own
Bhaskar Bhat, Director, Tata Sons Ltd., delivered the keynote address at the MMA Annual Convention 2022. He spoke on the theme: “How India Can Make This Decade Its Own.”
The theme for the convention is about how India can make this decade its own. I believe it’s not India’s decade but it is India’s Century. It’s only a question of the ‘how.’ I don’t profess to know too much about the ‘how’ but I do believe, as most of us in the Tata Group have betted on and believed, in this economic engine called India. It’s a very unique engine. It has been on a growth path, irrespective of governments and global ups and downs for the last 31 years, starting from 91-92. We have had years of slow growth and years of extraordinary growth. But like the proverbial Indian elephant, it is growth and it continues to grow. One extraordinary indicator has been the performance of the Indian stock markets. I did not really believe, through my career, that companies’ market caps represent their performance but the reality is that hard money is put into the markets.
The great bull run
The performance of Indian stock markets during the Covid period is now legendary. The index has perhaps more than doubled, except for the last three weeks, thanks to the war in Eastern Europe. Why I refer to the stock market is because it is real money chasing ideas or investments or performance. It has put money into the hands of many middle-class Indians, apart from investors themselves. But more than that, it signifies the potential of the economy.
The demand on companies has increased because of attrition. But this is not like the great resignation that is happening in the western world, triggered by soul searching by young people on what they do at work and why they work.
As we come out of the pandemic, we have to be careful but let us not be fearful. One important indicator of the Indian response is the recent announcement of opening up of the scheduled international flights. It indicates the confidence that the Indian government has placed in the so-called reduction of the danger of the pandemic. Through these two years, starting from 23rd of March 2020, the Ministry of Health has been working with the aviation sector, which has very rightly regulated flying—stopping flights for some time, regulating the capacity utilisation compared to pre-Covid levels, and then reviewing the pricing by each airline. The government is confident of handling even any minor, local outbreaks or if there is any recurrence in a new form or a new variant of the Sars-Covid virus.
Consumption-driven economy
For the current year, in Tata view, it is going to be an 8.8 percent GDP growth. It varies depending on who has done the projection but it is still a growth and which is one of the highest in the world. It will be driven, as usual, by consumption to begin with and thereafter by a cycle of capex investments and investments by industry after they have covered the capacity utilization shortfall, which is of the order of about 35 percent on average. It is going to be a very steady but positive and continuous growth in consumption and consumer expenditure. The accumulated savings over the last two years are going to be available to households.
The second is the performance of our rural sector. Overarching on all that has been the fact that three fourth of our population—700 plus million people—have been vaccinated. For consumer confidence to come back, it has to start at the level of the individual consumer. The actions of the government lead to confidence among consumers to go out and spend. The high physical touch sectors like restaurants, retailing and travel, which were significantly impacted, are going to come back with a bang. We are already witnessing this in some of our companies and it’ll only improve.
Our per capita GDP is so much lower than many other countries, which are as large as us or larger, and some smaller than us. But our journey is only upward.
Stressed labour market
The labour market is on fire. The demand on companies has increased because of attrition. But this is not like the great resignation that is happening in the western world, triggered by soul searching by young people on what they do at work and why they work. In India, it is due to the red-hot economy of startups and technology companies who want new-age talent and young talents. It is a good time to be in the job market today. Of course, the skills have to be quite different from what they were earlier.
Formalisation of economy
The third theme is the confidence that we all have in our elephant trudging along—maybe we’ll make the elephant even dance—is the formalisation of the Indian economy. That journey started several years back and it is a very determined and well-planned move.
We have had our problems with demonetisation and GST. But GST collections have been rising month on month. Even during some months of Covid, collections crossed 100,000 crores. Now we are crossing 130,000 crores. Formalisation of the economy is a very good sign as global investors look at investing in India as well.
Young at heart
The fourth theme that holds out great hope for India is the young population raring to go, not just to spend but to create new business models in this digital age. It’s an extraordinary change in India, which is the desire to make a significant impact in a selected sector of the economy. Not everyone succeeds but great and good ideas have found money and success. There are many lessons to be learned but these youngsters are not just young by age. They are young at heart as well, big risk takers, very hardworking and willing to get tripped at one hurdle and yet, rise and run again. That undercurrent in the economy bodes great news for everyone. It is very competitive. But India is such a huge market. Our per capita GDP is so much lower than many other countries, which are as large as us or larger, and some smaller than us. But our journey is only upward. In every sector—whether you take airlines or FMCG or fintech—the opportunities for transformation, change and improved consumer experience are only going to make it better and better.
3Cs – The key areas
Therefore, where should big investments need to be made? Based on what online and digital has shown us, I would drill down to three focus areas, namely: Convenience, Comfort and Cost. When I say convenience, Covid has showed us what we could do online comfortably sitting at home. You don’t have to venture out in a car and go to a retail outlet, park your car far away, walk to the retail outlet and purchase goods. Also, the cost of transactions has come down significantly, thanks to online.
Experience economy
All these are captured in ‘Experience.’ Globally, investments are going big time in experience economy. Consumers are willing to pay a multiple of what they were paying for a product, for the experience of acquiring that product. Nobody knows how it splits. But we know that premiums on brands and product categories are based on the functionality of a product. Sitting on top of that is the experience of the product, as well as the experience of transacting with a company in the purchase process; in the use process and in the after-sales service process both for a physical product or a service. If you take restaurants, it’s not the food alone. It is the experience of eating—sitting and getting served—that people pay for. The list goes on.
In experience economy, India has still not witnessed the kind of growth that we are going to see. The big fat Indian weddings where billions of dollars were flowing were on a back foot for two years. Now, it’s going to explode. The event itself at best or at worst, would be for two hours. But today, weddings last for four days. Each of them is sliced with a different experience, different theme, different dress, different jewellery and different food. So, we have to think in an innovative manner about the experience economy.
The emotional mix
In India, the Experience economy is mixed with what Indians are known for: Emotion. The number of movies made in India is not just about entertainment but emotions. So, when you mix experience with emotion, you get a bang for the buck, which is the product functionality, experience and emotion. All these combined gives India a unique position and economics for the companies.
The formalisation of economy, digitisation, globalization, atma nirbhar and the PLI scheme are all aligned towards making India stronger. There are debates about what is working and what is not working. But directionally, we are on the right path. I say this despite being involved in one of the most challenged sectors, which is aviation, where there is serious attempt by the government in trying to make structural changes through rationalisation of taxes and being thoughtful about networks, bilaterals and so on.
The DGCA and the Ministry of Health have made air travel safer, faster and comfortable and helped create the perception amongst Indians that air travel is not luxury travel anymore but the sensible way to travel. Of course, we have a great train network in India and also, our roads are improving.
Agility in uncertain times
But the point I want to credit the airlines with, is for their agility. Despite incurring 25,000 crores of losses year-on-year for the last two years, the aviation industry has delivered to the consumers’ requirement. Many of us had our own problems of refunds and flight cancellations. But the service has been on, throughout the pandemic despite the tough regulations. Industries like aviation, hospitality or retail have learnt to be agile, people-centered and to manage with the everyday uncertainty. People across industries, cities and nations across the globe had to face this uncertainty.
The harshness of our lockdown in 2020 created unprecedented pain to the migrant labour but we lived through that and the country came together to once again gather pace of growth. So it is a very India story.
As we look at India, it is no longer only limited to Chennai, Bombay, Bangalore, Hyderabad or Delhi. Thirty years ago, people in tier 2 and tier 3 towns had a much lower quality of life and lived with lower prices without demanding more. The people in towns have now proven that they are no less than their so-called city cousins, in aspiring for a better life. They have responded extraordinarily to availability of products, premiumization and quality. All these bode very well for the future and that is not going to last for only one decade. In my blue book, this is the India Century.