In this latest podcast episode, we look at emerging sectors/trends that are likely to drive investments in India, in the future and talk about aspects around the ongoing conflict between Russia and Ukraine that have impacted the Indian economy.
We also discuss policies, measures and efforts taken by the Indian government to ease doing business in India and share key takeaways on the growth story of India in the long-term.
Your host Rebecca Harding from Saltwhistle Communications talks to Tanwir Shirolkar, Senior Director, Transaction Advisory from Nexdigm in India.
In this latest podcast episode, we look at emerging sectors/trends that are likely to drive investments in India, in the future and talk about aspects around the ongoing conflict between Russia and Ukraine that have impacted the Indian economy.
We also discuss policies, measures and efforts taken by the Indian government to ease doing business in India and share key takeaways on the growth story of India in the long-term.
Your host Rebecca Harding from Saltwhistle Communications talks to Tanwir Shirolkar, Senior Director, Transaction Advisory from Nexdigm in India.
Rebecca Harding
Thank you for joining us for this Nexia turnaround restructuring and insolvency podcast series. We'll be exploring global issues that affect the world economy. I'm your host, Rebecca Harding and I'll be joined by a selection of experts from around the world in firms that are all part of the Nexia International Network, and all of whom are leaders in turnaround, restructuring and insolvency. Nexia International is a leading global network of independent accounting and consulting firms. All of the experts appearing on the show can be contacted via the Nexia International website. Thank you.
Hello, and in today's podcast we're going to be looking at India. The conflict in Ukraine, COVID and supply chain problems, have all had an impact. However, the impact has been tempered by government support initiatives and a very fast-growing economy so should business be investing in India? And what is the future of manufacturing there? I'm joined by Tanwir Shirolkar he is the senior director of transaction advisory services at Nexdigm.com in India. He's managed a diverse portfolio of clients from a wide variety of sectors, and he's advised many strategic investors with acquisition plans in India. He's also conducted financial due diligence's of portfolio valuations for private equity funds. So Hello, Tamwir how you doing?
Tanwir Shirolkar
Fine. Thank you so much. Hope you're doing fine as well.
Rebecca Harding
Yeah, I'm good apart from the rain here. It's a bit dull and dreary today for May. Otherwise we're good but tell me more about India. I mean, could you give me a just a view over the economy and sort of what's going on for business there and tell us about what's happening on the ground?
Tanwir Shirolkar
Yeah, so post Covid I think there is good recovery. And we have about 85% of population has been vaccinated. So that's a very good news, in terms of, you know, the economy going great. But at the same time, there has been some impact of the war. And this impact has been actually at a global level. And I will talk more about those sectors and the impact while we talk more.
Rebecca Harding
Yeah, if you could tell me about sort of things, the trends, that are doing well and the sectors that are doing well. In terms of the economy in India, and where you're seeing some investments happening at the moment.
Tanwir Shirolkar
Yes, actually, India has emerged as the fastest growing major economy in the world and is expected to be the amongst the top three economic powers in the world the next 10 to 15 years. The investment trend in the next few years is geared towards digitization, okay, and a lot of investments have been happening in E Health, Education Technology and E retail. For last two years, there has been lot of investments in these sectors. Healthcare there is tremendous opportunity for upgradation at every level, right from infrastructure development to delivery to process management. Then Automotive is a sector because the focus is shifting to electric vehicles to reduce the emissions and India is also becoming a hotspot for offshoring of automotive design and engineering services. And is being favored as a source and destination for automotive components for international companies. But I would say technology led innovations like digital payments, logistics, analytics driven customer engagements are supporting investments in E retail and logistics sectors.
Rebecca Harding
I mean, it's a huge amount going on there. And you really, I mean, it's a busy busy place, and I will surely, it's also been hit by things like the supply chain issues and COVID and now the current conflict. So, are you finding that investors are actually now taking precautions? Or has there been a change because of these big issues on the economy?
Tanwir Shirolkar
Yes, investors are skeptical and much vigilant before investing. Many deals are being structured as earnouts or other different mechanisms to safeguard the interests of both the buyers and sellers. I would say, because of this uncertainty, and greater emphasis has been put on understanding targets, cash flows, solvency risk and working capital normalisation. And investors are looking at more aggressive price reduction mechanisms, broader representations and warranty coverage and more favourable indemnity arrangements
Rebecca Harding
Right so I mean, some of the investment areas that you've talked about are ones that strike me as being directly affected by the awful conflict between Russia and Ukraine, could you talk a little more about how that conflict is impacting the economy in India, and the investments around those particular sector areas, such as manufacturing of trip chips and electric cars and so on, that you've spoken about?
Tanwir Shirolkar
Definitely the conflict between Russia and Ukraine has increased the level of uncertainty and the direct impact on India is as such limited to the extent of trade between the two nations, Russia and India, which is just about 1% and it's majorly into defence related. But indirect impact is a major concern, because it has created negative impact on the economy because of rising crude oil prices, base metals and agricultural commodities, which has increased inflation in the country and has led to a wider current account deficit. Because you know, India is vulnerable to high oil prices, because it's the largest importer of crude oil, 85% of its oil requirements has been, it's been through imports. So all these sectors like paints and oil makers and fertiliser companies are negatively impacted. Even though fuel prices have increased and it's giving rise to inflation and Russia and Ukraine are the major chips exporters globally. They both supply Palladium, Neon and Helium which are required for chip making and I think, because of those chip dependent sectors, such as automobile and IT sectors are badly. In fact, this crisis was even before the war, the world was already facing a semiconductor shortage. Further to add the prices of base metals like Aluminum, Nickel, Stainless Steels have also increased, which are the big key ingredients for the electric vehicle sector, which is where India is also focusing.
Rebecca Harding
Yeah, so it really is hitting the core sectors in India then isn't it all of this?
Tanwir Shirolkar
And just to add on global currencies are also under pressure and Indian Rupee has also not been spared and Forex reserves have been fallen from around 640 billion to around 600, less than 600 billion.
Rebecca Harding
I mean, what about higher prices? I mean, are the population being hit by higher prices?
Tanwir Shirolkar
Absolutely, it will impact the demand and consumption and even the warrants, I think the imposed sanctions on Russia and the supply chain disruptions will at least last for more than one year now. But I would say despite these challenges, the fundamentals of the Indian economy still remain strong from a long-term perspective and India is very well placed to deal with such type of situations.
Rebecca Harding
I mean, that is impressive that the economy is still strong, where others are really struggling, I think at the moment. So but India is still clearly dependent on other countries and economies in terms of its external supply chains and it's causing disruption for them, as you've talked about. So is your government introducing policies to reduce that trade dependency on other nations? What are they doing to tackle this?
Tanwir Shirolkar
In fact, most of the countries have stepped up efforts to diversify their supply chains and reducing their dependence on one single source. Many multinational companies are adding operations in Asian countries like India, Vietnam, Thailand, even Bangladesh and Malaysia. India has also ramped up their efforts to you know, form policies like production, linked incentive schemes, which facilitates investments and building manufacturing capabilities in critical sectors like drug intermediaries, API's medical devices, electronic components, white goods, solar PV models. Yep. So government of India has been pushing on some economic reforms, like promoting programmes like making India self reliant and making India self sufficient by promoting domestic industry and reducing reliance on imported goods.
Rebecca Harding
So do you feel that they've actually been successful in having an impact on the economy and on production, domestic production and manufacturing?
Tanwir Shirolkar
Yeah, I think all these are yet to materialise, and it will take time. In fact, India's trade dependencies with China has been increased recently but at the same time, I would say government is also making sustained efforts to reduce to achieve a more balanced trade with China. India has also imposed some anti-dumping duties or some sort of duties on imports. So yeah, all this will take time to materialise, I would say.
Rebecca Harding
So I mean, as you said before India is making absolutely fantastic progress in the rankings for places where it's great to do business, I mean, the timescales of that change from what your 142 out of the 190 economies in 2014 and now you're 63 in 2020. I mean, that's incredible. That's a phenomenal achievement. And do you think this is going to continue? Do you think this is something that's going to go ahead and continue to improve? And what's going on to do that? What's happening in the economy to do that with the government?
Tanwir Shirolkar
So yeah, so they have India has come up with ease of doing business watch into initiative where it's expected to, you know, be more active collaboration with the various state governments digitization of manual processes, then integration of central and state level systems, through technology standardisation of overlapping compliances. And further reduction of all the processes and legacy procedures that tend to impair the objective of business and industry. So in recent years, I think there were more than 25,000 compliances, which were reducing,
Rebecca Harding
I think that's something a lot of countries could do, reducing at, that kind of rate. I mean, that's, that's impressive. So what do you think the future is for India? You know, what, what should investors and businesses that are listening to this podcast take away from the discussion do you think? What are the key messages?
Tanwir Shirolkar
Yeah, so India has been on the fast is one of the fastest growing economies and its real GDP is in the range of 4 to 8.3%. In last five years, it has seen a sharp rebound after pandemic and it is further expected that with the bold reforms and continued higher capital expenditure and investment in sectors like infrastructure, the Indian economies are supposed to grow stronger in years to come. And largely the population is vaccinated now, and I will say India's potential is yet to be fully realised that it has got the all the ability and capacity to become the next global manufacturing for the entire world, especially in industries like textiles, speciality chemicals, packaging, electronics, and even consumer dictionary products. Basically, India's attractiveness lies in the untapped potential of its large consumer market with rising disposable income. Skilled Workforce at lower wages and quality inputs for export. India is the third largest unicorn base in the world with 83 Unicorns currently and is expected to increase to 200 In next two years.
Rebecca Harding
You've also talked about the technological transformation that's going on, which is basically what China did didn't it became really cutting edge in terms of its technology, to be able to deliver to the West in terms of consumer goods and manufacturing. So do you feel that India is actually following in China's footsteps, but China now is probably not producing it in the same way that it used to. And India's got an opportunity now to step into its into its place?
Tanwir Shirolkar
Absolutely. Yeah, absolutely. India is expected to be the third largest consumer economy. As its consumption, we rise, we tripled to 4 trillion by 2025. Owing to shift in consumer behavior and expenditure patterns. So I think India is working towards improving the outside environment for the investor and with the these reforms, it would definitely make an attractive destination for investments.
Rebecca Harding
That's been brilliant Tanwir. Thank you so much for your help today. And for talking about these issues. It's been really interesting. And I'm sure everyone will really find this discussion very helpful. So thank you, and have a great day.
Tanwir Shirolkar
Thank you. Thank you, everybody. Thanks. Bye.
Rebecca Harding
Thank you so much for joining us. This podcast was brought to you by the Nexia turnaround restructuring insolvency business group. The group was formed to bring together financial, legal and operational expertise from across the Nexia network to support global clients and international business at times of operational challenges and financial distress. If you want to get in touch with any of our speakers, then please click the link accompanying this podcast or visit the Nexia website all views expressed in this podcast are individual opinions and do not constitute professional advice. You're advised to seek professional advice if you want to see how an issue applies to your own situation.