The long-term growth opportunity 2021 presents

Before we look ahead to 2021, let us pause and look at the current year. Corporate numbers were a positive surprise. If we consider Q1 and the monthly performance thereafter, we saw a steady improvement on all parameters. Particularly noticeable was the top line of corporate India broadly recovering to pre-Covid levels and the remarkable improvement in absolute EBITDA numbers and margin. Similarly, GDP numbers were a positive surprise coming in much better than the expectations, indicating that we are most likely to be in a V-shaped recovery, giving us plenty to do in 2021.

What will drive growth in 2021 and the future? We have a huge opportunity to modernise and drive agriculture and animal husbandry, and harness water. In this process lies the possibility to move value-added agro-industries to rural India, providing employment and improving livelihoods.

On the infrastructure front, it is clear that India is yet to be built: Providing housing for all; expanding and modernising health and education; rebuilding urban India; connecting India, be it through vastly improved road networks, rail networks, high-speed railways, modern metro and other transportation systems in cities, new ports, expansion of existing ports; improving airports and power supply; and in particular making India clean and green. In short, a 25-year opportunity to grow.

On the manufacturing front, we are in an exciting phase. The pandemic taught manufacturing India to extract efficiencies and productivity gains. Other parts of the economy will leverage these learnings into their future operations and prosper from it. 

The next growth driver is possibly the most exciting of all: The services sector. The learnings from this sector and what is possible are already visible, be it in e-learning, e-health, work from home in the areas of information technology, banking and financial services and parts of government. These would grow at a rapid pace as they are scaled. 

While we are doing all this, in parallel lies the task to prepare ourselves for the digital super cycle by laying the foundation of a digital India.

The digital super cycle will encompass progress in all areas and will accelerate further on advancements in machine learning and artificial intelligence. We are boarding this super cycle at an opportune and affordable time. To understand this, we only have to see the cost of access in India. Broadband cost in our country is the lowest anywhere in the world. This gives everybody, be it a person in the village or a person in urban India, equal access to the benefits of the super cycle. 

In India, the digital super cycle will grow by also leveraging the vast pool of technology workers who can be redeployed for this effort. We will most likely now see products and applications and indeed platforms that will originate in India for use in India and for the world.

We will also see a vast number of start-ups in these areas. It would be right to say that the digital super cycle will be driven by what I would like to call start-up India. These firms would be fully capable of leveraging technology into a vast array of business applications.

Are there going to be any losers in this. Indeed, any business which is not capable of resetting its mind, adapting to the new normal and leveraging learnings at a never before pace, will be under challenge. In a way it is going to be a David and Goliath story. The small but nimble and agile challenger, able to build scale and capability and mount a challenge is going to be the winner in this race.

We have so far looked at early advances in the digital super cycle using the phrase fintech. My belief is that fintech is going to be just a small part of this super cycle, which will encompass almost every area of life.

We will be helped in this effort by the global backdrop, which is benign, our external account, which is surplus, and a low interest rate scenario where, at this point in time, the entire T-bill yield curve is below policy rates. We are also in a period of ample liquidity, both global and local. The global liquidity allows us to scale up our FDI significantly. India’s financial system is now well-placed with years of responsible growth to fuel an accelerated economic upcycle.

If we work together with dedication, concentration and effort, we should be able to achieve our aspirational growth target of double-digits for a very long period of time. While we do all this, we need to remember that there is a still a degree of pain in the system and those who need a helping hand, be it at the individual level or at the corporate level, continue to get the support they need.

The author is a veteran banker