Thoughts on Business and Technology

Next decade’s secular bull market ?

bear-v-billThere are always bulls and bears in every market, however lately in developed countries like U.S even the eternal optimists like Warren Buffett and Charlie Munger are cautious.

The contrast in the outlook of investors in US like Ray Dalio, Buffett Buffett Stanley Druckenmiller and Sam Zell compared to investors in developing markets like India e.g. Rakesh Jhunjhunwala is instructive. While the investment gurus in US are cautious to negative in their outlook many investors in India are strongly optimistic about equities in the future.

I believe the difference is not a personality trait, rather it reflects the markets they operate in. Investors in US are negative while investors in India need not be. Their outlook is shaped by the phase of economic and demographic cycle their countries are in. India has the tailwind of demographics and significant opportunity to improve its overall productivity and infrastructure where as developed countries lack both.

Interestingly China is also in the same boat as US in this regard due to their aging demographics ( thanks to one child policy) and over building of infrastructure in the past decades. i.e. middle income trap

Africa has favorable demographics but they have a lot to catch up on human capital development and political stability, this leaves India as a significant engine of growth for the next 1-2 decades.

However it will not be a cake walk for India to achieve higher economic growth and prosperity for its population. India will have to work to resolve some of the hurdles limiting its growth and turning capital away. India has the following in its favor

  • Demographics
  • Political stability
  • Reasonable rule of law (better than Africa, more trusted than China/Russia but less effective than developed countries)
  • Critical mass in human talent ( on % basis it does a poor job but in terms of absolute numbers it can provide decent pool of talent compared to any country)
  • Reasonable access to resources ( thanks to its geographic location access to oil and minerals is close to its shores hence not captive to other powers like China)
  •  Relatively clean global image
  • Strong civilization-foundation
  • Improving access to cheap capital
  • Vested interests to see india grow for their own benefit

India’s challenges

  • Retarded and prohibitive laws and regulation
  • Political stalemates if there is no strong govt like the current govt with good majority
  • Ineffective and slow govt administration
  • Internal sabotage by Left and Islamists
  • Huge young population with inferior skills and lack of employment is a recipe for unrest
  • Corruption
  • Policies based on ideals rather than practical implications
  • Threat from aggressive neighbors
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