India Capital Fund Letter
Comment of the Day

November 21 2018

Commentary by Eoin Treacy

India Capital Fund Letter

Thanks to a subscriber for this report from which includes a great deal of data which may be of interest. Here is a section:

Eoin Treacy's view

Here is a link to the full report.

Here is a section from it:

Manufacturing growth continues to be among the strongest in the world, with the PMI accelerating to 53.1 in October from 52.2 the previous month (Figure 2); now 15 months of consecutive expansion. The drivers for new investment seem in place with the number of job openings the highest ever this year along with solid growth in new orders.

Cement production, a decent proxy for capital investment, is on track to comfortably exceed 14%, the first double digit growth in several years (Figure 1). Electricity production also continues to accelerate (Figure 3).  This is a what a strong macro picture looks like.

India’s Electrification Drive Picking Up Pace
Power demand will be further bolstered by the government’s rural electrification drive. The Saubhagya, or “electricity for all” scheme is a government sponsored project announced by Prime Minister Modi in September of last year.   Saubhagya is the Hindi word for good fortune and under this scheme, households are either eligible for free electricity connections or charged a nominal Rs500 ($8).  Rapid progress has been made in the last 12 months with close to three million new households being electrified every month. ICR portfolio company REC - (Rural Electrification Corporation) is the nodal agency for the Saubhagya scheme.

However, despite the strong start, a lot remains to be done, with only 9 out of 30 states having achieved 100% household electrification so far (Figure 4).   Uttar Pradesh, India’s most populous state, with a population of almost 2/3rd that of the US - still has less than 80% households electrified.  While electricity consumption has more than doubled since 2000, per capita consumption is less than one tenth of that for the US, and one-fifth of that for China (Figure 5).

It occurs to me that the rise of the global consumer is predicated on the rising standards of living of billions of people who have never experienced that condition before. Most people think about China when we talk about the rise of the global consumer but China’s consumers are already middle class; or most of them are. India is the world’s most populous nation and its drive towards improving sanitation, access to electricity, the introduction of the digital economy and growing the manufacturing base are tomorrow’s story and therefore should command our attention today.

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