Not just cricket: Why our emerging markets experts like India

India may have fallen short in the 2023 Cricket World Cup, but it’s been on a winning run since last hosting a world cup in 2011

• India now an attractive EM for investors
• Digital infrastructure has strengthened economy
• Find out about Pendal Global Emerging Markets Opportunities fund

INDIA hosted the ICC Cricket World Cup in 2023 for the first time in 12 years.

The result was not what local fans wanted to see, unlike 2011 when India last hosted — and won — the tournament.

But the country is certainly winning in other ways, points out Paul Wimborne, who co-manages Pendal Global Emerging Markets Opportunities fund.

In the intervening 12 years between the two tournaments, the country changed massively, becoming a more attractive location for emerging markets investors, says Wimborne.

“The most significant changes have been in internet connectivity and digital infrastructure.

“India now has the second-highest number of internet users in the world. An estimated 60 per cent of the population are connected so we are talking about hundreds of millions of people.

“They have high-speed internet access particularly in the urban areas and that’s a massive change since the 2011 World Cup,” he says.

How India became a digital giant

In 2015 the Narendra Modi government launched Digital India, a program designed to digitise government services and provide internet infrastructure across the country.

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The successful project altered India and became a blueprint for developing nations, Wimborne says.

There are three layers to India’s “digital stack”, which is essentially government-backed APIs (application programming interfaces) on which third parties can build software.

“The first layer is identity. The identity card in India is known as Aadhaar. It is linked to biometric data which provides proof of identity.

“Over 90 per cent of the population has a card with a 12-digit unique identifier. About 700 million of the cards on issue are now linked to a bank account.

“The second layer is a unified payment interface, or UPI. It is essentially an instant payment system via mobile, which makes payments as easy as sending a message or scanning a QR code.

“There are now an estimated 10 billion transactions every month on the system.

“The third layer is a data exchange. For example, the government runs DigiLocker, which provides access to authentic digital documents linked to citizens. It might be a passport or a driving licence, or the ability to e-sign documents.”

Huge changes ahead

The approach has provided India with the building blocks for future innovation and services, Wimborne says.

“We are going to see huge changes in things like healthcare, and digital commerce. SMEs (small-to-medium enterprises) will have much greater ability to sell online.

“Some of the key benefits we’ve seen so far is for banks and mobile phone companies. It has reduced the time taken to do checks and massively cut costs.

“Some of the benefits accruing to the broader economy range from less tax avoidance, less cash in the economy and a reduction in general fraud and corruption,” Wimborne says.

“India has always had a strong services export economy based on software and services. This is going to kick things along even further. India is going to become an even bigger powerhouse.

“India has done well over the last few years in terms of economic growth and the equity market.

“These reforms and changes have increased the trend growth rate in India. There has been huge progress already, but the real benefits might be still to come over the next five to ten years.”

About Pendal Global Emerging Markets Opportunities Fund

James Syme, Paul Wimborne and Ada Chan are co-managers of Pendal’s Global Emerging Markets Opportunities Fund.

The fund aims to add value through a combination of country allocation and individual stock selection.

The country allocation process is based on analysis of a country’s economic growth, monetary policy, market liquidity, currency, governance/politics and equity market valuation.

The stock selection process focuses on buying quality growth stocks at attractive valuations.

Find out more about Pendal Global Emerging Markets Opportunities Fund here
 
Pendal is a global investment management business focused on delivering superior investment returns for our clients through active management.

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