77 years of independence. What does independence mean to you?
Independence has a different connotation. For an individual, it is the ability to do whatever he or she likes, not to depend on someone else or not to depend upon someone else financially. For a company, independence means you are globally competitive. You do not require subsidies, you do not require crutches.
For a nation, independence means you are able to do what you want to do for your citizens without worrying about the rest of the world. So, independence has different connotations but one common theme is you can do what you like without worrying about what others will say.
Talking about completing 77 years of independence, if India, if I have to imagine India as a 77-year investor, how would you look at that investor’s story – struggle or success story?
If we look at our history, almost all peers have outperformed us. In 1947, we were at par with Japan in per capita GDP; in the 60s, at par with South Korea; in the 80s, at par with China. Today, they are all way ahead of us. Why did that happen? Well, they followed a certain path of economic policies and we chose a different path.
But post 1990, we started accelerating. From 2014 to today, we have moved from 10th largest economy to 5th largest. We are on the way to become the 3rd largest economy in the next few years. Our market share in global GDP is up from 2.6% in 2014 to 3.7% today and should cross 4-4.5% in a few years. So, undoubtedly, India’s development, India’s growth have speeded, but we have a long distance to cover.
There are three Indias, 1% of Indians living like French citizens with that kind of per capita GDP, about 30% of India is middle income but 70% of India is still sub-Saharan Africa. Those are the guys whose demand are barely met roti, kapda, makan. We need to ensure that they get access to quality healthcare, education and other things. We have a distance to cover but the confidence is that this time we have picked up speed, there is acceleration.
A lot needs to be done definitely, but in the journey so far, what according to you have been the important and the most crucial pillars of development for India?
The development of India is entirely attributable to its entrepreneurs. These are the people who are modern-day Abhimanyu. They fight not only the Kauravas which is the market volatility, China dumping, raw material price movements, infrastructure bottleneck but sometimes they also fight the Pandavas which is regulatory burden, compliance burden, uneven policies and despite that they have created growth in areas like two-wheelers, generic pharma, IT services, services exports.
India is a globally competitive brand. People trust us, people respect us. We need to now replicate this success across many other industries. The growth of India is entirely attributable to entrepreneurs of India, the modern-day Abhimanyus who are breaking Chakravyuh and winning the war.
Would you call yourself a person who is financially independent?
Yes, I will call myself financially independent, though I am still not doing whatever I wanted to do.
And what is that?
So, today, if I want to spend 10 days in Vipassana, I would not be able to do it because I have a job to do. So, yes, I am financially independent, but not that kind of independent which I should be.
So, when we talk about financial independence as a concept also, it looks like it is interlinked with a lot of other things. In your case, it is also the responsibilities that you have tied yourself with and without completing those responsibilities you would not be able to achieve what you have maybe. How complex is this entire concept of financial freedom and financial independence or how easy it is?
It is easy as well as complex. It is easy because at the end of the day all of us need roti, kapda, makhan. It is complex because as Indians, most of us have come from a position of very-very less. We had always struggled. I have queued in the ration shops. I have waited for things to book and get them after 10 years like a telephone line.
So, somewhere in our mind, even when we have reached more than what we need, we are still driven by our past. We are anchored in deficiency and deficit. I guess the next generation is far better. They are far more financially secure than our generation.
So, when we talk about financial freedom, when we talk about financial independence, if you have to recommend a financially independent portfolio on this occasion of Independence Day to a Gen Z, to someone who is middle aged and to someone who is almost close to being a senior citizen, what would that be?
For all three, income minus expenses equal to savings is not the right equation. It is always income minus savings equal to expenses. Pair utne hi lambe karo jitni aap ki chadar badi ho (Stretch your legs according to your coverlet).
Second, please do regular investment. Little drops of water make an ocean. Also, be a long-term investor. Rome was not built in a day. Your portfolio cannot be built and deliver a return in a day.
Third, do not put all eggs in one basket. Be disciplined asset allocator. But covering all of that is one most important thing that is equilibrium. You need to balance your greed and fear. A Gen Z, a millennial, a senior citizen, all will be driven by emotions. When everything is looking bad, do not get tempted by the fear. When everything is too good to be true, do not get lured by greed. Maintain equilibrium. If you follow these five things, income minus savings equal to expenses, regular investment, long-term investment, disciplined investment and equilibrium, you would reach nirvana in financial terms.
Talking about your financial habits or talking about the way you understand or the kind of relationship you have with money, any particular habit or any particular thought which you feel you need independence from?
So while I preach people to maintain equilibrium between greed and fear, I am not the best example of following it. I am still driven by emotions. Most of the time my daughter is able to say the state of the market by looking at my face. Emotions are very much part of our DNA. And as long as I am cognisant of my emotions, hopefully my decisions will be more rational.
In some sense, like Sourav Ganguly was Maharaja of the off side but not necessarily that great a player on the on side. But he developed that onside in order to become a successful player. If he had remained Maharaja of the off side, then he would not have been as successful cricketer as he was. The same way, we have certain natural positivity, some natural off side. But there is also an on side, which is where our emotions overtake our rationality. We need to be mimicking Sourav Ganguly in playing and mastering the on side, even if it is not our natural side.
We are talking about India, where we are seeing Gen Z’s being very money making savvy, not investment savvy yet, but they really want to make money. We are looking at an India that believes in early retirement, in the gig economy. Gen Zs are handling their parents or older generation portfolio. How do we tackle this change?
There are clear no-no’s which are not worth doing. Clear no-no’s. One, we have seen a lot of Indians losing money in Ponzi schemes. Whatever appears to be too good to be true, generally would not be true. Please stay away from those Ponzi schemes. Second, we have seen people trying to become lakhpati overnight, whether it is crypto trading, whether it is Dabba trading, grey market trading, gaming, lottery. Please stay away from that. Those are not the sure shot way of making money.
So if you avoid losing money, that itself is an achievement. The second thing is India is a rising tide. Whichever boat you will sit on, if it does not have a hole, will get lifted by the rising tide. Now some may get lifted more, some less, but every boat will be lifted as long as you are not in the boat which has a hole in it.
In investment, a boat has a hole when promoters are not following appropriate governance. If they do not care about minority shareholders. That boat is not going to get lifted. So be long on India growth story. Avoid boats with the hole of mis-governance and you are done.
So with this Aazadi Ka Jashn, we will also be getting into the festival season and according to you, what are the important triggers for the Indian market and the road ahead?
We have to overcome election 24. In 2004, as well as 2009, we saw markets reacting, at least on the election result day when the results were unexpected. Second, most important for the market is the fundamentals, which is corporate profitability. Now there are many factors which will impact corporate profitability. If the US interest rates remain higher for longer, there will be an impact on our valuation and stock prices.
If energy prices go up, there will be an impact on corporate profitability. At the end of the day, how do our entrepreneurs compete on a global market, on a global scale and continue to make profit? This will determine where our markets go.
What will be the kind of sectors that would participate in this rise in India story for next few years? What would you bet on?
All companies which are driven by promoters who have vision to do something, ability to execute it on ground and who are not taking minority shareholders for a ride, will create India’s growth story and be a part of it. Sectorally, banks and financial services will provide a catalyst for growth in terms of credit. They will generally grow at more than the real GDP growth and hence, good banks, good financial services firms should do well.
In IT, as well as pharma, Indians are globally competitive. Today, they are going through a rough patch, but that is mid-air turbulence. Once we leave the pocket, there will be a smooth ride ahead.
The third is manufacturing in India. China is a very, very large player there, but people are moving out of China. We are grabbing some market share there. Any Indian company which has globally competitive products or services and which can become part of the global supply chain, should be beneficiary of this manufacturing theme. From chemicals to engineering, we are seeing multiple sectors where manufacturing in India is progressing well. These are some of the themes where if you back the right company, the right promoter, you will do well.
In the entire freedom struggle and independence story that India has, your favourite story and your favourite freedom fighter?
Politically, Mahatma Gandhi, Sardar Patel, Jawaharlal Nehru, Subhash Chandra Bose, these were the idols whom we looked at in the independence struggle. But when I grew up, I realised that even businessmen of India fought very, very hard to give us economic freedom. From Jamshedji Tata to JRD Tata, from Ghanshyam Das Birla to Aditya Vikram Birla, from Walchand Hirachand to Jamnalal Bajaj, these were the icons who fought for India’s independence in economic sense. They created jobs, they created development and they created growth. One favourite example is how Tatas pledged their family’s jewellery to raise loans so that they can pay salaries and wages in Jamshedpur.
I still remember one Britisher mentioned that if Tatas produce iron and steel, I will be happy to eat that. I am glad that Tatas have shown the Britishers that India can produce iron and steel. That spirit is the economic independence for India.