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After witnessing ups and lows of the stock market for three decades, Bharat Shah, Executive Director of ASK Investment Managers, believes that investors are looking at an unprecedented opportunity. In this interview with N Mahalakshmi, the veteran fund manager shares why he holds this view and which sectors he believes will do well. He also talks about why he is just an engaged observer of the emergent verticals and not an active investor. Edited excerpts from the interview.
What’s the big picture as you see it? You’ve always been bullish on India, and I don’t think in the past 30 years, we have seen a moment like this, where a whole bunch of factors, local and global, seem to be coming together to make the perfect setting for a fantastic bull run. How do you see it?
I’ll answer in two parts. One for India and the second as a bit of a comparison to the rest of the world. As far as India is concerned, I have absolutely no doubt that we are at the cusp of one of the biggest economic expansions ever. Also, it will be distinguished not only compared to (what it was in) the past, but I think that the economic expansion will be distinguished compared to (expansion seen by) the rest of the world as well. But this is not confined to merely a high rate of growth. What is more important is also predictable growth, which is not (from) a happenstance or chance, but something that you can believe is (driven by) structural elements. That kind of growth rate is of greater value because it reduces uncertainty… the discount rates come down, because of less uncertainty.
The second very important part is the superior quality of the growth rate ahead. That’s because of a number of really strong initiatives (taken) and (the resultant) changes that have happened in the economic fabric of the country over the last many years. All of these have their own ecosystem, which takes time to build, and now enough of those changes have happened… Of course, some more changes and more reforms are on the way but I think we can see the edifice (standing) on a strong foundation. Third is that our lending industry has never been in a better shape than what it is today… asset quality, the debt-equity ratio of the lenders, the credit culture that has emerged after a lot of cleaning up that has occurred, and the borrower balance sheets are also healthy and deleveraged, plus the cost of capital has declined systemically through fiscal and current account deficit control. Therefore, all these ensure that the finance of the country is in good shape for this growth crescendo to happen.
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Finally, the capital efficiency of the system is rising, (when considering) return on equity. And this has happened through the pandemic period itself. I don’t have the exact final numbers for return on equity of the corporate sector for 2022-23. But I believe it will probably be the highest in the world, if not close to where America is, in terms of the return on equity. So that’s a second factor that the quality of the growth overall is much superior than in the past. The combination of superior growth rate along with a predictable superior quality of growth rate creates a base, in my opinion, for a long-term rising crescendo. Therefore, this economic expansion will reflect in the profits and cash flows of the businesses, their values, and eventually into the market values and returns and indices of the market. I think we are at an unprecedented stage. In my 35 years of observing investments in this country, I think, truly, we are at a special moment. And when I’m saying ‘over a period of time’, (I’m not talking about) two years or three years or five years, I’m taking more like 10 and 15 and 20 years kind of crescendos. So that’s one…
Globally, if you see, and if you take, say, three major economies America, India and China and trace the returns over the last 10, 20 and 30 years. The two names which have been right at the top, whether you take the last one decade, two decades or three decades… are maybe India and America. In some periods, it is America which is number one, but in other periods, it is India which is at number one. So that just shows that, even over the last 30 years, the Indian markets have done decently well. If you track that 30-year period and see China’s economic expansion, (which is) an unprecedented 13.5 percent compounded, but in India it was 8.5 percent and America it was 3.8 percent. But, if you see the investment returns by the markets, America has been about 9.2 percent, India has been 8.3 percent in dollar terms, and China has been about 1.9 percent. Therefore, China’s high economic growth has barely converted, maybe 15 percent of that, to stock market returns. In India, it is one for one; in America, for one unit of growth, it has been some 2.25 units of an outcome in terms of returns; that extra addition or reduction has been due to the quality of growth. In India, that quality premium has not been there; in America, it has been significant; and in China, it has been a huge negative. My belief is that China would struggle with growth rate very clearly; 13.5 percent (economic growth rate) is a long-forgotten history now. In the future, in China, it will struggle at a single-digit number for a length of time. In America, 3.8 percent (of economic growth) going ahead probably is doubtful. India, without any doubt in my mind, the growth rate will be higher… we have seen 8.5 percent nominal growth over 30 years. The quality part in America, again there is a question mark, whether that quality part of the premium would occur in the same way and how much it will diminish is the question. In China, economic growth has been a bugbear for them, and therefore, economic growth has not converted into returns. In India’s case, I think the quality, the predictability, the solidity are distinct reasons (for economic growth) to get better. I think India will have a rising growth rate and superior quality of growth, and therefore, all reasons to believe India will do better in markets in the next 10 and 20 years than what it has done in the last 30 years. In America, clearly, it (economic growth) will be lower. In the case of China, growth rate is a definite dampener… quality of growth, whether it will improve or not, only time will tell. Therefore, I believe India has a real chance to emerge as the number one market over the coming decades. That growth will not be free from volatility, which markets always will provide… But through that volatility and upheavals, you will see a smooth rising curve.
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In China, what has happened over the last two decades, which has not happened in India that we are now excited about, is this investment-led growth, the right infrastructure investments, the port-sector, etc. Do you see that as a big component of this quality of earnings because one thing that really distinguishes India in terms of quality is the basket of companies or the nature of earnings? The larger is the share of the consumer sector in your basket, the better is the quality of earnings and higher are the ROEs. As we go more into the core sector or, you know, sectors that are linked to the economy, the quality of earnings might be lower. Do you see that becoming a worry at any point of time or, because we are right at the onset of this whole change, it’s not the time to worry, it’s the time to be bullish?
I think there’s a greater opportunity rather than a concern. Infrastructure and the pace at which it has expanded, whether it’s airports, ports, roads or railways, the overall (improvement) that has been going on… all of these have been unprecedented. I think it will serve industry and manufacturing very well. PLI-led manufacturing support is another reason why Indian manufacturing is beginning to come of age. And whether we took off mobile phones or electronics or specialty chemicals or pharmaceuticals or various other areas or even electric vehicles and the connected system… I think systematically these efforts will strengthen manufacturing, not only for India but also for the global market. Related is the revolution happening and beginning to show in logistics, which is a significant part of the economy as an expenditure, and plenty of reasons to believe it’ll (expenses) come down meaningfully as a percentage in a rising economy. Therefore, those are savings for the businesses in some sense. Then the digital embrace, I think, without any question, the society, the businesses, small or large, and the government itself, the digital embrace of the Indian economy is a very defining new feature that we have not seen in similar enthusiasm, intensity and character earlier. Then the startup ecosystem, even though there may be some issues and some cyclical ups and downs, but net-net it is a system which will provide new entrepreneurship, innovations, new business models. Then the way finance overall has been digitised, and UPI is a prime example of the global revolution that we have heralded… in many other homegrown initiatives, like the ONDC or the account-aggregator idea or the Aadhaar-based affirmation of identity… these are very, very strong foundational pillars, which allow economic growth rate to get accelerated.
Also, what very importantly happened is the speed and alacrity with which we have been seizing that China-plus in China-alternative kind of situation. That opportunity is important, and I think we have shown remarkable agility in beginning to keep capturing important parts.
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Also, it is not about merely infrastructure and manufacturing, but even in exports there has been a renewed thrust and focus sector by sector. I think that will be an important catalyst for growth. Therefore, business expansion, new capital expenditure, consumption, infrastructure and exports, all of these will emerge, aided and abetted by manufacturing and industry, logistics, technology, and digital prowess… driving the growth rate. Finally, I would say (a factor is) a belief. Without belief, without confidence, neither businesses invest in the future, nor investors invest in the market. And I think one of the most remarkable changes that has happened in the character of economic activity in society, I would say, is the change in the optimism, confidence and self-belief. Especially, with a huge challenge like Covid, the way we managed compared to the rest of the world, it affirms why we need to have that self-belief far more in place. And therefore, I think that final self-belief and confidence and optimism and capability to be guiding your own destiny is a very important, intangible, and very powerful one. That brings all of the powerful things together to drive growth ahead.
Now, if you just look at the last 10 years, again, you know, it’s the consumption pillar that did really remarkably well. All the things that are right now were not right 10 years back. So looking into the future, would you bet on the investment theme or the consumption?
I think it is all of that… investment, lead capex, lead businesses, manufacturing industry, infra, consumption itself will do very well because economic expansion in an aspirational society with still a modest per capita income but growing would result in a greater part of that income converted into consumption. Therefore, that will be the engine which will further drive (growth). India is a large enough local market where manufacturing and creation of economic activity can serve not only domestic interest but also international interests. Therefore, I think, logically, we are focusing on building that crescendo even on exports. Last year has been a bit of a dampener for reasons that we know, because of the war, supply-chain disruptions, the decline or stagnation of the economies in the Western world and many other things. Therefore, these are technical kinds of challenges. But I think we are rightly focused there. And finally, I think we have demonstrated that we can be relied upon not only to absorb large doses of capital, not just in businesses but also into markets; we can give a gainful output and account of it. Very, very few economies can demonstrate both large absorption of capital, both in businesses and markets, as well as the productive outcome and output against that over a period of time. Therefore, that external capital will keep driving our ambition. We have adroitly facilitated the emergence of many new financial instruments to tap into this capital by making business conditions easier and therefore (giving) greater incentive. For anything to really get moving, it takes time and adequate force. I think the force has been applied for a length of time. Now I think the locomotive is beginning to move into the right motion. With less friction, we will move ahead.
Now, if we look at a closer horizon of say the next quarter or two, in fact, the rest of the year… last one year you’ve seen the economy being very resilient. The best of analysts’ predictions fell short of the real number. Next two quarters, do you think it will be the other way around? Do you see any reason for slowing down or moderation in growth?
Not one, I don’t really see it. Some businesses based on particular economic conditions and the global context and domestic contexts may have some attenuation or acceleration, depending upon where it is positioned. But whether the aggregator number is looking at a weaker footing, I don’t see any reason why this would be. Even with the first quarter numbers, it is too early to pronounce on that. But I see 2023-24 is a good year from a business perspective. The top line will grow healthy, margins (unless something really challenging comes up) have a reason to improve, because last year was exceptional in the raw-material and supply chain and logistics cost disruption… the conditions (now) should be favourable. Therefore, with volume growth and decent top-line growth, and with the new phenomenon of our inflation rate being lower than the Western world… overall, I see good conditions for volume growth, top-line growth and margins to improve because the cost will not rise in the same way, with improving capital efficiency. Relative charges on interest and depreciation for good businesses also should be relatively curtailed and therefore I see healthy, very healthy double-digit profit growth for the corporate sector.
One question is related to the market cycle. Today our being at a record high means different things for different people. Anybody who’s not made money over the last one year says what’s the big deal, finally, I got the price that I had last year. For newbies, the new highs are a celebration. For you, after having seen various boom-bust cycles, when you look at the combination of factors such as the near-term growth, the long-term trajectory, the predictability of it and valuations… where do you think we are in that market cycle?
Index rising or stock prices of good businesses rising is a normal phenomenon, it is nothing exceptional. Ultimately, stock prices are, as we all know, slaves of long-term earning power. But that is only a partial statement. You also need a superior quality of growth for a full outcome to occur. Quality of growth can aid the returns, on top of that earnings growth can reduce or can make it neutral. Therefore, quality of growth is often not counted but is a very vital part of the long-term return generating process. And even investors often pay far too much premium for growth rather than the quality of growth. That is another reason why the quality of growth is very vital. In the long term, sustaining the growth rate is much more challenging. But a superior quality growth rate is not necessarily challenging on a long-term basis. Unless there is something, depending on the context of the business, or a change in management… what is a high-quality business, whether it is growing at a higher rate or medium rate, still can maintain that high quality for a long period of time. Therefore, quality of growth is a much more reliable indicator for value creation and value prediction.
Therefore, all put together, as I was mentioning earlier, the rate of growth will get distinguished compared to the past. And what will become more distinguished, going ahead, will be the quality of growth. Index or the stock price is merely a milestone on the way. People get excited because Homo Sapiens by nature are much more short term. They get overjoyed and over and depressed with the immediacy of the events. But in the long term, I think we are on a foundational, defining journey of a kind, which, in my opinion, will be unprecedented. So, we are at the cusp of that. Therefore, some number of the index, whether 65,000 becoming 75,000 or 80,000, or 100,000, or 125,000, I truly fail to understand what the excitement is all about. It’s just business as usual. The only thing, with investing, these milestones come over a period of time and therefore they acquire a special meaning to the observers. But given the context of long-term investing, that any good investing is all about, these are merely milestones that you observe but do not really have any particular emotion about.
In the next one year what will surprise you? We are told that stock prices mimic earnings, which is true over a long period of time but this may not play out even over one year because stock market returns tend to be lumpy. So, this year going forward, what will surprise you? Will it be market overshooting 30 percent return or going down 30 percent?
One year is too short to predict. More soothsaying than forecasting, I prefer to observe what is happening and then adapt to it, and try to gain out of it. Rather than make many observations and then getting carried away by it and tending to believe your own narrative… Therefore, even though I drew up the macro and larger picture, as an investor, I remain micro. I focus on individual businesses, the character, the character of the management, the character of the business, the size of opportunity, the earnings growth, the quality of growth, judgment of value, and the contextual margin of safety at which you want to buy, so that you aim to make — apart from the earnings growth and quality of growth annuities — you also want to draw on that margin of safety as a third set of return… that micro stock-specific remains my model of investing. If, as you mentioned, there were a 30 percent drop or a 30 percent rise, either of the two would be eye-popping. I hope not. Because undue rise also is not very healthy and undue fall also unnecessarily creates confusion.
Therefore, you are saying that, at a macro-level or market-level, we are pretty much in a rational zone. So, you should expect a moderate increase… not expect a big correction or a big breakout.
Markets have gone up but market valuations have not gone to a barren territory. And therefore, index rising is merely a natural phenomenon. What may not be so natural is when the valuation is neither disproportionately higher or lower than what the underlying economic growth fundamentals suggest. What I see today is more or less the economic fundamentals of the businesses and their valuations healthily align. They are not unduly cheap, but I don’t regard them as having deterrent valuations either. So they are in a reasonably rational zone. There may be individual cases where some stocks may be misaligned to that reality. But broadly, I don’t see any ruptures or aberrations in the character of the market behaviour or the valuations.
Two questions. What are you doing in markets now? Do you find yourself buying a lot more or selling a lot more or holding on to whatever stocks you have? Secondly, I know you follow growth at a reasonable price kind of a model. So, where do you see pockets of value right now?
What we are doing in terms of buying or more buying would be a function of new capital that we receive from the clients. So whatever new capital that we get, would get deployed into the businesses. Generally speaking, we are always deployed, we don’t maintain liquidity as an investment tool. Therefore, there’s no attempt to time the market, there is no attempt to predict market index behaviour. There is rarely any meaningful level of liquidity, there’ll be just some decimal points of liquidity around. New opportunities are always a source of traction, but they have to be not only matching but superior and materially superior than what you have already. Unless something is significantly superior than what you have, replacing it may not be a very good idea. Because what you have, you have dealt with, you have known that animal for a length of time, and you probably know a little better how it is going to behave, hopefully. While a new animal is something to be worked upon. So that remains our mindset, but seeking new opportunities, replacing opportunities where most of the economic efficiency or benefits are already extracted in terms of the returns is a normal ongoing activity. So, no distinguishing situation there.
On the second question, about where we see value, a lot of sectors will do well. As I mentioned, our focus always is on micro, business-specific, and stock-specific. That’s what drives us. That’s what we remain focused on. On economic, macro, geopolitical, many other very interesting-sounding sound bytes that abound all over the media… we remain aware but we pay no attention to it to make our investment decisions. That said, I think plenty of activities will do well. Consumption across its various facets will do very well. And consumption is altering in India. It’s no longer the kind of rudimentary staples that is the only source of consumption. Discretionary durables, luxury… there are many other facets (to the consumption story). I think lending will do remarkably well.
In terms of stocks, where do you see value in these pockets, whether it is consumption or lending?
Individual pockets of course there are value picks or opportunities, like in every market. We need to work hard and find them.
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Could you narrow it down further without, of course, naming stocks? Luxury, for example, you said is a theme that emerged especially post Covid. Even in the Western world, stocks of a lot of luxury companies such as Hermes have done very well. Similarly, here there are stocks in similar segments. Is that a space that excites you?
Luxury does not have to be defined by these luxury brands alone. In every area, the consumption graph is getting more aspirational and premium. In every area, you can find (this) whether you’re a buyer of cars or whether you’re a buyer of liquor or whether you’re a buyer of consumer staples or durables, in each area, the aspirational quotient of consumption is rising.
In lending, I see tremendous opportunities because the entire stage is set… lender balance sheets are healthy, the quality of asset book is superb, conditions are ripe for more lending, India is underleveraged in general, borrowers have a healthy balance sheet, credit culture is strong, cost of capital has materially declined compared to the past. Therefore, lending has multiple levers and will see superb double-digit kind of compounding. Similarly, insurance. Similarly, infra-related capital goods, cement that supports infra… I think over the last 20 years, cement witnessed 6-7 percent volume growth. In my opinion, all the indicators probably will mean a couple of percentage points more compounded volume growth in an industry which has become very robust and strong over the last 20 years of consolidation and character improvement. Specialty chemicals, active pharmaceutical ingredients, pharmaceuticals per se, healthcare-related, agro-chem specialty… many of these businesses have multiple years of compounding opportunity, partly because they are seizing the opportunity that China is not in a position to fully defend. That confidence of scale, size and performance is giving all of these businesses newfound confidence to invest in kinds of business activity that they had never done in the past.
So multiple areas of opportunity… I don’t think we’ll be shorting. One thing that we less appreciate about Indian markets and economy. But it is hard to find any market or economy as variegated and diverse as India, with many world-beating services, emergent new manufacturing and industrial activity, energy, infra, logistics and many other businesses. Also, there is consumption, lending, China-substitution businesses, seizing of the global opportunity to exports, many activities are acquiring more dimensions of capability and growth. Therefore, it will not just be horizontal growth. The verticality of the growth rate because of the character improvement and solidity will be an extra dimension.
I have a lot of questions on what you just said. For example, in lending, what pockets are you most excited about? From the past, you had great admiration for Bajaj Finance. Despite high valuations, the stock did exceptionally well for all the periods that you have held the stock, because they were able to show growth and the market was never disappointed. Now you’re looking at a whole bunch of headwinds, the fact that they are bigger in size, any regulatory compulsion to become a bank, which will drag down RoEs, or the most recent thing, which is Jio Finance coming and disrupting that whole NBFC space. How do you see this playing out? Entry of a strong player always causes some damage to the ecosystem. Do you see that as a big worry?
I can’t really talk much about any particular name, especially on a public medium like this. But some of the most important pillars that we see with Bajaj Finance and its significant evolution over a period of time. Those pillars are a superior ability to extract growth from the opportunity around, even more importantly very high-quality growth, not just growth rate per se… also their return on assets and return on equity are materially distinguished compared to all other players. Also, very wise and intelligent investments into technology all along, not just today, to build that strength and capability, so that lending becomes a bit more of a science and not nearly so much more of an art. Finally, a management that represents a phenomenal combination of integrity and agility… those are the reasons why we have been invested in Bajaj Finance, I think now for 13 years.
As far as the overall opportunities are concerned, I already talked about the size of the opportunity for lending is large. The lending sector is healthy, the borrowing segment is healthy, India is underleveraged as a country, India is expanding therefore that will need more capital. Plus, India is putting new business models to work, so that will also need capital. Therefore, the opportunity to grow is massive. I would think that a good, strong new player will actually strengthen the firmament of the industry and not weaken it. I genuinely believe that a new good player with a strong balance sheet and net worth will actually strengthen the ecosystem.
So another question is on specialty chemicals, which again, you have been very bullish on for a very long time. Last one year doesn’t seem to have been too good for this because there were a whole bunch of issues from China reopening, destocking and all of these temporary issues. Today, investor interest in that sector does not look high. Is this a temporary correction phase? How long do you see this sentiment lasting?
I think it will be a relatively short one, and is likely to be a short-lived phenomenon. We must also not forget that many of the specialty chemicals are not merely domestic selling businesses, they sell a pretty large percentage of the output to the international markets. International markets of Europe and America are going through two kinds of contrasting situations. On one end, their outsourcing from India — strategically and even from an economic sense — is getting higher and will keep getting higher. Logically because, other than China, there is no other country at the scale and quality and diversity of chemical chemistry capability that India has. So for strategic and economic reasons both, outsourcing by Europe and America from India as a percentage would increase, relatively speaking. So that supports Indian chemical businesses in the long term. On the other end, those economies are undergoing stress of their own and dislocations of their own. Some of the dislocations are actually favourable, like Europe is facing energy-related dislocation, some of it is prompting them to actually outsource more from India. Some of it is resulting in a bit of disruption in their business. So again, it’s a mixed effect. Plus, the other element has been China’s weakened growth. Over 2021-22, they went through Covid-related challenges and emerging out of that is not easy, their growth rates are really caught up… in fact, they have been wobbling. Therefore, there has been a pressure on them to put out their excess output into the markets. And therefore, some of the prices have come down competitively speaking sharply. I hope it is not a materially long-term phenomenon because that will not make sense for them either really. I think Indian competitive capabilities have gone up. But there is a near-term pressure, without any question. That pressure would reflect in the results for some of the businesses, not necessarily all of them. As much as I understand, it is more near-term rather than persistent.
One question on the new-age companies. Are you convinced about the kinds of moats that they enjoy today? What is the quality of moat to you?
Moats are exactly the same for any business, whether the opportunity is large, whether you have scale, whether you can build a profitable business, whether you can build a durable business, ultimately, these are the levers of value creation. A large size of opportunity and management capability will give you the right potential to keep growing at a meaningful pace in a compounding way, not merely an episodic way. When the character of the business is right, and the way you manage it is efficient, then the quality of the growth will be superior. Quality also gives us durability and resilience. Quality also gives you longevity and durability, which again has a bearing on value creation because durability improves the value of a business today. Also, quality gives predictability, predictability also improves the value, other things being equal. Relatively high predictability reduces the perceived risk, and, therefore, the applied discount rate to judge the value; and therefore it improves the value of the business… Many of those businesses still have to demonstrate the management’s solidity, even management durability. Many of them, they are today, they are not there tomorrow, you’re not very sure how much longevity to ascribe to them. Many of them don’t have meaningful skin in the game and, therefore, you’re not particularly sure… unless you have meaningful skin in the game, your decision making may suffer from callous disregard for value-creation norms.
While some of them may build scale, they are not profitable. They try to define profits, some of them, in a very creative way and in some futuristic timeframe. So we will have to see… because profits are profits, there are no multiple definitions of profits. A simple definition of a profit in any effective way is the real cash flow. If you’re generating real cash flow period after period, then you know that you’re doing (the business in a) healthy way. Virtually none of them today demonstrates that, and therefore they need to prove that. Also, it is not for me to automatically believe in them. They have to demonstrate that they have it in them to deserve the trust and confidence of investors. Why should I automatically believe that they have it in them and they will create magic? It is for them to demonstrate that they are building a business opportunity which is sound, that they are building it in the right way and that the character of businesses is right. Therefore, I remain an observer. I want to remain engaged with judging that opportunity, evaluating and improving my understanding. But I don’t want to feel compelled or in a rush to simply commit to them till they deserve that confidence and capital.
That would mean that they start to show profits without any adjustments?
Many of them are not able to adequately define their business model. That itself is a worry, because even without understanding their business model, how do you get any predictability as to where it is? The ability to run the business model is another question. But first of all, the business model itself in many cases is not clear. Some of them may have a reasonable business model, but whether at a scale it is built, whether at a scale it is profitably built, again are open questions. So, there are all of these issues that need to be settled. And I would say it’s not one of them, or a few of them (the conditions) that need to be satisfied, every single one of them needs to be satisfied. You need credible management, you need a good business model, you need scale, you need profitability, which results in cash flows, you need predictability, you need durability. Thereafter, the valuation of those businesses needs to make sense. I would say, when any of these businesses access public markets, the onus is on them to prove (that they are worth investing in) rather than automatically having the trust and confidence of the investors. I think there is a material difference in the mindset between the two.
Private markets are far more generous when times are good, or what they believe to be good times. And really accountability for that capital in terms of core tenets of value creation, private capital tends to be somewhat more unduly generous, in my opinion. The definition of what is value creation itself is a highly debatable notion. When they come to the public market, then they are exposed to all those questions and legitimately so, not that public markets are free from their own idiosyncrasies and behaviour and misbehaviour at times. But public markets over the period of time are highly clinically sanitised places. They reflect reality quite admirably over a period of time. Those norms are tough, those are not very short term, very generous, benevolent (evaluations given by) private capital.
Finally, what are the three or four most important reasons for you to be bullish on India?
Growth crescendo of a rising number of a kind we have not witnessed already on a very large base, we are already the fifth-largest economy in nominal terms in the world. In purchasing power parity terms, we are actually the third-largest economy in the world. So, therefore, we are one of the biggest economies and which is going to grow at a meaningful rate. Second, with a superior quality of growth that gives predictability and longevity to growth. Third, that, in turn, results in a compounding kind of growth. When the same growth… and it occurs over a longer period, the compounding is not fully appreciated, even though it is talked about so easily. That compounding over the longer term is a huge, huge power where what may look like a reasonable thing but done repeatedly, relentlessly over a long run can produce an outcome which is disproportionate to what that individual period (could have delivered)… finally, I think we underestimate the power of belief, the power of confidence. Without optimism, businesses are not built, without optimism, investments are not built. You need scepticism in order to ensure (that you are optimistic about the right things)… but you can’t be only pessimistic and hope to create value. So you need the right scepticism in order to preclude what you don’t want to feel optimistic about. But you need to have basic confidence about the future, about opportunity, about the likely framework, which will govern all of that and have confidence in that, and you feel that enough conditions exist that you can run through normal challenges of the business and yet come up trumps.
I think today as a society, as an economy, as a business ecosystem, we have that belief, perhaps probably much more than most parts of the world, that we exercise greater control over our destiny. That confidence of having our destiny under our control is a vital idea to catalyse investments and effect outcomes.
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