Practical analysis for investment professionals
10 March 2017

Weekend Reads: Adapting to India

Posted In: Weekend Reads

There’s a place in Mumbai called Dhobi Ghat. It’s a nearly 2.5-acre open-air laundry that offers a site for compelling photos, a glimpse of the old Bombay, and an opportunity to place your understanding of India on a shaky foundation.

“Guidebooks will tell you this place is essential to Mumbai,” my colleague Vidhu Shekhar, CFA, told me. “And maybe that used to be true, but people have washing machines now.”

A fast-growing country will change more quickly than the guidebooks that describe it. But tourists are likely to visit places they have heard about from people like themselves. What is true for mutual funds, content, or consumer products is true for tourist destinations: Usage is driven by distribution.

So my invitation to you this weekend is straightforward: Try to understand the landmass of India and forget about the country for a moment.

A Cacophony of Civilizations

Language comes in a number of flavors here. India has nearly 900, and many of their words are not translatable into English. Apart from piquing our interest, the cultural diversity this produces is breathtaking.

And think about this: At least five of these languages — Hindi, Bengali, Telugu, Marathi, and Tamil — have 50-million native speakers in India alone. There are 22 languages enumerated in the Indian constitution, and the majority of Indians have a mother tongue other than Hindi.

The territorial history of India over the last 5,000 years serves as a metaphor of the breadth of life experience on the subcontinent. (And there are scientists who think civilization in India is much older than described.)

The appropriate comparison for the region’s historically volatile borders and varied linguistic backgrounds is Europe. It wouldn’t be a waste of time to look at the global history of political borders as well.

A caution: The last Weekend Reads I wrote warned about assuming maps are fact. And it’s worth noting that even the territories described therein are opinions.

Truth Is Relative

I once gave an intern a seemingly trivial assignment: Find India’s unemployment rate.

The challenge of this is straightforward. You can create a number, but what concept of employment do you measure? Some global measures explicitly disclaim that their intent is to measure a specific, well-educated urban segment of the population, which is possible.

But there is a risk of focusing too much on “people like us” when looking at India. Neelkanth Mishra notes that as many as 90% of Indian workers are employed in the informal sector. How does one define employment in that area which appears to be thriving in spite of itself?

So be wary of any data that doesn’t disclose both its sample size and sampling method. Arguably, some data issues are a residual of the intrinsic difficulty of measuring India, but some appear more intentional. Saurabh Mukherjea, CFA, offered what he calls “palliatives” for this analytical problem in a recent note.

Execution Is Possible (If You Know the Market)

The immense success of McDonald’s in India shows it’s possible for global brands to adapt here, but it is far from the norm. A 2007 study noted that firms historically have more luck entering China than India.

Part of the problem is it seems easier to operate a global enterprise in India than it really is. English is widely spoken here, and the country is a massive cultural exporter. But the breadth of adaptation Amazon undertook to compete here is telling. And McDonald’s success aside, those companies recently exiting the market include Twitter, AstraZeneca, Telenor, and DreamWorks.

What’s true of global businesses is also true of global investment managers. A who’s who of firms have tried and failed to expand here: Fidelity, JPMorgan, Goldman Sachs, and Nomura. The list goes on, with protecting profitability given as the reason.

Yet the investment community thrives in its own way. I was at a packed gathering of the Indian Association of Investment Professionals to hear Howard Marks, CFA. By my count there are 25 mutual fund complexes managing upwards of a billion dollars. You wouldn’t recognize many of them if you were eyeing the market from afar.

Further Reading on India

Why It’s Important to Pay Attention to Words

Mind the Gap

Market Matters


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All posts are the opinion of the author. As such, they should not be construed as investment advice, nor do the opinions expressed necessarily reflect the views of CFA Institute or the author’s employer.

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About the Author(s)
Sloane Ortel

Sloane Ortel is the founder of Invest Vegan, an ethics-first registered investment adviser that manages distinctive discretionary portfolios of public equities on behalf of aligned individuals and institutions. Before establishing her own firm, she joined CFA Institute’s staff as a sophomore at Fordham University and spent close to a decade helping members adapt to a changing investment landscape as a collaborator, curator, and commentator. She is also a co-host of Free Money, a podcast for sustainability-oriented investors with a sense of humor.

2 thoughts on “Weekend Reads: Adapting to India”

  1. Swarup ghosh says:

    Wonderfully written . Interesting reading .

  2. Promit Sengupta says:

    Indeed, interesting read. Problem lies in poor labor market data. Government tried and failed because of informal practices that is not getting captured in labor market participation rate.

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