Investment Outlook , Published Feb 19, 2020
India’s journey to become a $5 trillion economy needs to be inclusive, sustainable and impactful. Impact Entrepreneurship seeks to build a business while chasing a problem worth solving. This is likely to influence capital markets in the coming decade and assist India in achieving its $5 trillion goal.
I will start with a disclaimer – I am a forester who ventured into investing and so my world view on economics is ecological. As most of you would understand forest is a complex ecosystem that thrives on balance. When you start looking at money and its obsession with simplistic measures of success such as Gross Domestic Product (GDP) you understand how unreal the world of economics and GDP is. Having said that, having accepted the topic of commenting on Economy’s path to a US $5 Trillion economy I thought it may be pertinent to bring the idea of humane growth. Any logical Indian would agree that a US $5 Trillion economy must find a path of growth that is inclusive, sustainable and impactful. A country of 1.3 Billion people need to find ways of growing its GDP while making sure it has put in place strong social security for its bottom 10 percent that would struggle to survive the chase of GDP growth. We also need to make sure that the US $5 trillion is creating economic opportunity for the other 70 percent above the bottom 10 percent and is not concentrated with the top 10 percent of India.
To achieve all that India would need to look at the idea of sustainable, inclusive and impactful entrepreneurship. Sustainable entrepreneurship would mean doing your business in a manner that you are creating a positive externality on climate and society while chasing your dream of solving a problem. Inclusive would mean that value-creating entrepreneurship should spread beyond commercial centers and create livelihoods and jobs where people live. Impact Entrepreneurship seeks to challenge an entrepreneur to build a business while chasing a Problem worth Solving.
Think about it, what would make you deliver growth, chasing the money held by 100 million Indians or making the life of 750 million Indians more effective? At the turn of every century, India started witnessing the power of economically excluded. India’s fifth largest bank today is not even 14 years old and exclusively serves the poor and has delivered a market cap that is close to US $10 billion. Imagine India is seeing emergence of unicorns that are solving the complex problems of Indian agriculture or are cleaning India while generating jobs for rag pickers without any aid from the government.
No global society has reached a US $5 trillion economic size without being inclusive, sustainable, impactful and responsible. India has demonstrated huge potential in nurturing entrepreneurship that is willing to be inclusive and impactful. To be a truly inclusive economy, India needs to invest US $650 billion every year in meeting its impact goals. Given the importance of India in the global goals in delivering sustainability, I am confident that the world would not just be cheering but a willing ally in making these investments. US $500 billion globally has been committed to the idea of Impact Investing, an idea that India has probably played a defining role in bringing to this stage. The trend of global capital pool making significant allocations to Impact Investing would continue and only enhance further which is why the biggest private equity funds have launched multiple impact funds worth billions worldwide.
Impact Investing will be the biggest trend influencing the capital markets in the coming decade and may have an important role in assisting India on its ambitious journey of becoming a US $5 Trillion economy responsibly, impactfully and in the most inclusive manner. The budget announcement by the Honourable Finance Minister of India to put in place a regulated Social Stock Exchange will encourage global capital to engage with Indian impact entrepreneurs in a regulated manner thus, delivering the much-needed impetus.
The idea of being a US $5 Trillion economy is laudable but it would be beautiful if we deliver it sustainably, impactfully and inclusively.
About Vineet Rai
Vineet Rai is the Founder and CEO of Aavishkaar Group, a pioneer in the impact investment space. Vineet has received numerous awards including the Impact Investor of the Year by News Corp and Porter Prize among others.
Investment Outlook 2020