India Changing Economic Policies and future

Born in 1990, I was born into shining India era. By the time I entered middle school, Vajpayee was in power with help of Coalition. Left parties were not in power and India was on the path of big infrastructure projects. But the biggest part of this development was investment in IT sector. 

I was always inclined to be an engineer but my interests were in core departments. By the time I was trying to get into college though, India was changing. It was on the path of becoming the backroom for global IT companies. I chose computer because India had chosen computer. And coincidentally, the college I entered was celebrating its 10 year Anniversary. The college was literally created after I was born and coincidentally the entire IT city was built around the same time, from scratch. It was the biggest experiment gone right. 

And India was now in the race. Every state wanted to build new IT cities. The first time I saw Hitech City and the big building with block lettered T C S on it, I understood. I had seen the government offices, with lush gardens and lots of files. But they never showed aspirational India. But these glass towers with shiny new objects, these were what India was promised. 

This was also the start of the social media and world was getting smaller. The teens and young adults started getting messages on facebook and orkut while the parents were still on messages. This started converging when the internet started becoming ubiquitous and mobile phones kept becoming cheap. Slowly from Viber and skype into whatsapp, the entire family members were coming into groups. Discussing the new and shiny offers their kids got. It was Indian roaring decade. 

The next phase came when India wanted to leap big. Narendra Modi and his Make in India mission. His symbol of Indian lion on the move in manufacturing was a lofty goal but reality was much different. Instead of going for high manufacturing at home, India doubled down bets on IT and services while China kept increasing their lead against the entire developmental world in supply chain creation. India was in sweet spot, while China was doing the grunt work, Indian youth had skipped the middle phase from Agricuture and Services, the manufacturing Industry. It was a long ride. Foreign funds were coming for delivery apps, and every month new entrepreneurs were coming, 20 something aged. The discussions for the aspirational few were about valuation of companies and IP. This cheap money phenomenon was seen in how government focus was shifting with Startup India, getting more and more companies to Unicorn status. 

Then came the shocks. The system which was built on shaky grounds was about to get into period of turmoil. The Pandemic which for a short period was like end of civilization was here. The central banks around the world stepped in. The slashed interest rates for businesses to be viable. On top of this, It workers could work from the comfort of their home. The result, instead of slowing down, the entire IT system went into overdrive. The companies who were lush with cheap money due to low interests had shortage of candidates with  experience and the salaries shot up to the sky. It felt like Indian decade had already arrived. Until we went in for the rude awakening. 

The Ukraine war. The effects were profound. The central banks who had already leveraged themselves with producing cheap money in pandemic also went for supply chain shock. Now, the system was overheating with inflation hitting decades long high in western world. The banks had to step in again only this time tightening the screws and raising interest rates to cool down the inflation. And the cheap money coming to India dried up. While India still increased its hold in cheap IT, the entrepreneurship with apps creation era was over. 

Another effect of Ukraine war. The world got separated into blocks once again. And here I have to go back to my birth year. I was born in 1990, a year from official fall of Soviet union. I had always seen unipolar world, with supply chains having firm inclination to western world as becoming more and more as consumer and eastern world confirming their status as factory/back office for the western world. But now, big powers did not want just cheap products but more control on who they depend on. 

And now here we are. The divisions got calcified in 4 years since the Ukraine conflict started. China and USA are more suspicious of each other than ever before and trying to decouple. But China is the factory of the world today and no other country can give the scale to anyone as China. Japan is slowing down for decades, Korea, Taiwan are very small compared to China. While rest of the Asian tigers are more finance oriented than manufacturing. Apart from China, the rest of the developing world did not hope to get anywhere close unless they got a big push just like China got 40 years ago. And the main beneficiary was India. 

India is the only country with the scale of billion working age people, and millions of college graduate in various field. Modi is already on the path of making India a smaller version of factory of the world. And what India needs now is the money to scale up. And the knowledge to skill up. Suddenly there is big change happening in the funds coming to India. They are not about more IT services anymore. India needs to do the grunt work that China already excels at. We are the +1 in China +1. As world decouples from China, India becomes relevant more and more. 

And here we have CEO like minister Fadanavis, signing deals with various companies to build global capacity centers. The engines of growth for next 10 years in India. As India becomes factory of the world, what we are going to get are much smaller news as its not shiny India or aspirational India anymore but one that will deploy most jobs to people, even if that is doing grunt work. As the privatization and economic liberalization extends, billionaires like Ambani and Adani will get even more rich. But so will be the poorest Indians. The quiet shift from Private investment to very long term, structural and institutional investment is here.