In India 2020: A Vision for the New Millennium, A.P.J. Abdul Kalam and Y.S. Rajan detailed how India could become a developed country and one of the world’s four largest economies by 2020. But how is the India 2020 vision holding up in 2020?

With the world’s second-largest population, a democratic government, and a capitalist economy, India represented enormous untapped economic potential when India 2020 was written more than 20 years ago.

During the ensuing two decades, however, that promise went largely unfulfilled. While India’s economy grew significantly, it was just the seventh-largest economy in 2018 (between France and Italy)1 and its per capita income is still far below the other countries that comprise the BRICS countries (Brazil, Russia, India, China, and South Africa), as shown below.

Over the past several years, however, numerous developments have reenergized the belief that India may be on the cusp of reaching a key point in its economic evolution. While the effects of COVID-19 will impact the near term, massive advances in digital infrastructure and connectivity, coupled with a series of governmental reforms, have laid the foundation for long-term growth as India transitions to a more formalized economy.

Specifically, digital connectivity and policies supporting the move to a digital, rules-based economy are allowing strong companies to become stronger in India. The gap between leaders and laggards is expanding. Quality companies with proven management teams and durable, sustainable advantages are widening their competitive moats, gaining market share, and growing through consolidation.

At the same time, governmental reforms—and the resulting transition to a cashless economy and the shift away from crony capitalism—are creating a more level playing field for companies operating in India. This means companies are more likely to thrive or fail on their own merits, rather than on their connections to governmental officials or their ability to navigate an informal economy.

The transition will be far from smooth, however. Crumbling physical infrastructure (as shown in the chart below), poor air quality and other environmental concerns, unintended consequences of governmental policies, and the challenges of overcoming a legacy of crony capitalism will slow India’s growth.

In the following three post series, we share our findings about recent changes in India that have sparked new optimism about the country’s economic development—and also examine the headwinds that will likely impede this progress as these changes unfold (including the affects of COVID-19 on the domestic economy and global supply chains).

These obstacles are being addressed at drastically different rates and in a less-than-predictable fashion. That means that while India’s transition to a more formal, organized economy is progressing, it will be a messy, non-linear process.

And while the country’s total addressable market (TAM) is undeniably compelling, the ability to monetize that TAM will vary significantly by sector and from company to company.

The nature of the country’s development means that identifying high-quality companies that can thrive in this new competitive reality is paramount.  Ultimately, we are excited about India’s potential, and we conclude that it is a textbook example of the importance of active management when investing in emerging markets—because the chaotic nature of India’s development represents opportunity for active managers to capture alpha.

1 Source: The World Bank. December 31, 2018.

India in 2020 Series

Part 2: Headwinds (and Tailwinds) in India
Part 3: Sector Insights in India

D.J. Neiman, CFA, Partner, is a research analyst and co-director of research for William Blair’s Global Equity team.

RELATED POSTS

SUBSCRIBE NOW

Gain insights on macro market events, the economy, and investing strategies.
Receive our latest blog posts in your Inbox with headlines like:

SIGN UP

FOLLOW US

twitterfooterlinkedinfooteryoutubefooterfacebookfooter

RSS FEED

Please carefully consider the Funds’ investment objective, risks, charges, and expenses before investing. This and other information is contained in the Funds’ prospectus and summary prospectus, which you may obtain by calling +1 800 742 7272. Read the prospectus and summary prospectus carefully before investing. Investing includes the risk of loss.

Any statements or opinions expressed are those of the author as of the date of publication, are subject to change without notice as economic and markets conditions dictate, and may not reflect the opinions of other investment teams within William Blair Investment Management, LLC or the Investment Management Division of William Blair & Company, L.L.C.

This content is for informational and educational purposes only and not intended as investment advice or a recommendation to buy or sell any security. Investment advice and recommendations can be provided only after careful consideration of an investor’s objectives, guidelines, and restrictions.

Factual information has been taken from sources we believe to be reliable, but its accuracy, completeness or interpretation cannot be guaranteed. Investments are subject to market risk. Forecasts, estimates, and certain information contained herein are based upon proprietary research and should not be interpreted as investment advice, as an offer or solicitation, nor as the purchase or sale of any financial instrument. Statements concerning financial market trends are based on current market conditions, which will fluctuate.

William Blair does not provide legal or tax advice. Please consult your tax and/or legal counsel for specific tax questions and concerns.

Distributed by William Blair & Company, L.L.C., member FINRA/SIPC.

The William Blair Funds are available to U.S. residents only. Non-U.S. residents, please click here.

Copyright © 2020 William Blair & Company, L.L.C. "William Blair” is a registered trademark of William Blair & Company, L.L.C. No part of this material may be reproduced in any form, or referred to in any other publication, without express written consent.

Statement of Financial Condition | NMS Rule 605 & 606 | Business Continuity Plan | UK Stewardship Code
Cookie Policy | Social Media Disclaimer | Privacy & Security | FINRA’s BrokerCheck

FOLLOW US

twitterfooterlinkedinfooteryoutubefooterfacebookfooter

RSS FEED

Please carefully consider the Funds’ investment objective, risks, charges, and expenses before investing. This and other information is contained in the Funds’ prospectus and summary prospectus, which you may obtain by calling +1 800 742 7272. Read the prospectus and summary prospectus carefully before investing. Investing includes the risk of loss.

Any statements or opinions expressed are those of the author as of the date of publication, are subject to change without notice as economic and markets conditions dictate, and may not reflect the opinions of other investment teams within William Blair Investment Management, LLC or the Investment Management Division of William Blair & Company, L.L.C.

This content is for informational and educational purposes only and not intended as investment advice or a recommendation to buy or sell any security. Investment advice and recommendations can be provided only after careful consideration of an investor’s objectives, guidelines, and restrictions.

Factual information has been taken from sources we believe to be reliable, but its accuracy, completeness or interpretation cannot be guaranteed. Investments are subject to market risk. Forecasts, estimates, and certain information contained herein are based upon proprietary research and should not be interpreted as investment advice, as an offer or solicitation, nor as the purchase or sale of any financial instrument. Statements concerning financial market trends are based on current market conditions, which will fluctuate.

William Blair does not provide legal or tax advice. Please consult your tax and/or legal counsel for specific tax questions and concerns.

Distributed by William Blair & Company, L.L.C., member FINRA/SIPC.

The William Blair Funds are available to U.S. residents only. Non-U.S. residents, please click here.

Copyright © 2020 William Blair & Company, L.L.C. "William Blair” is a registered trademark of William Blair & Company, L.L.C. No part of this material may be reproduced in any form, or referred to in any other publication, without express written consent.

Statement of Financial Condition | NMS Rule 605 & 606 | Business Continuity Plan | UK Stewardship Code
Cookie Policy | Social Media Disclaimer | Privacy & Security | FINRA’s BrokerCheck

logo

Subscribe Now

Gain insights on macro market events, the economy, and investing strategies. Receive our latest blog posts in your Inbox with headlines like:

SIGN UP

Send this to friend