MILITARY POWER
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India's spending on the Military as a percentage of GDP is not growing rapidly enough. It is about 2% of its GDP, which is just not sufficient. We are getting into a world where Raw Power matters. This is the starting point for India to become relevant after the USA and China. This has to be non-negotiable, and a trade-off on other priorities for expenditure cannot be considered.
If you look at the Middle East, a small country like Israel commands disproportionate power because of its Military might. Europe has underspent on Defence for years
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because of NATO and is now worried about President Trump wanting Europe to pay its fair share on its own Defence.
However, India is trying to develop its own Defence manufacturing capability and become a global hub for defence production. India's defence exports have reached an all-time high, surging from ₹686 crores in FY 2013-14 to ₹21,083 crores in FY 2023-24. In the current year, Defence exports are set to reach an all-time high, seeing about a 78% increase over the previous year. USA, France, and Armenia are the top three buyers.
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FINANCIAL POWER
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You become a Financial powerhouse if
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You are the Reserve Currency
The US has got away with having the largest current account deficit worldwide because of the Dollar Reserve Currency status.
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You have genuine current account surpluses
Since 1991, when our economy opened, we have virtually had a Current Account deficit for the entire 35 years. FPI stock in India is US$ 900 bn. However, total reserves are a
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little over US$ 600 bn because of these deficits. This is in spite of a benign oil situation for the last 10 years and large NRI repatriations. We have to aspire to have a genuine current account surplus soon. However, it will be difficult for India to move to a Current Account surplus when the world is moving towards more protectionism.
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India needs to compete globally and not rely on protecting its large domestic market. We are the fifth-largest economy and are moving rapidly towards being the third-largest economy, so we need to have open borders and compete globally.
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CREATIVITY AND INNOVATION
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We do not really have a single global brand.
US: Apple, Google, Facebook, Amazon, Coke, Pepsi
Europe: Univer, BMW, Mercedes, Zara, Ikea, Nike
Korea: Samsung, Hyundai.
Chinese: Lenovo, TikTok, BYD
Japan: Mitsubishi, Toyota, Sony
We need to have a global consumer brand. We have done
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very well in the software services business, but even here, we not have a product like Microsoft. Amazon made losses for 20 years, but the markets still paid value for that and gave it time to grow into a global brand. We are one of the largest exporters of gems and jewellery, but even here, we have not created a brand. So, Indian Entrepreneurs need to have enough self-belief and innovative ability to make a global product.
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India needs to improve ROTI
(Return on Time Invested)
to transform it into the future
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When we execute projects - both in the public and private areas - the concept of "Chalta Hai" prevails. Approvals take more time than expected; machinery does not arrive on time, labour shortages, festivals, etc., all cause delays in the execution of projects. In March 2024, it was estimated that
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the cost overrun and delay of about 1800 infrastructure projects amounted to about Rs. 5 lakh cr of additional cost and an average of 36 months of delay. Multiply that for the private projects, there has been a massive waste of scarce resources.
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The Dollar continues to be strong in spite of
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Long-term yields rising
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Record levels of debt.
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Massive current account deficit
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Massive fiscal deficit.
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The Dollar commands trust because its Military and Innovative Power allow it to get disproportionate Financial Power. A word of caution is that if President Trump cuts taxes and adds tariffs - it is going to be very inflationary for the US - and the rising bond yields are reflecting that fear.
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DEBT FUND
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With Trump's win, the Dollar index has become very strong in anticipation of his pro-American policies. His policy is expected to be inflationary, and hence, the US 10-year Government security yield also moved upwards. Our debt 10-year GSec yield, too, has drifted upwards to almost 7%, and if it crosses that, it could be an excellent time to enter into long-term debt.
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