Digital India: Investing in the future, rewarding in the present

Imagine waking up in the morning and reaching for your phone to check the weather forecast for the day. As you get ready for work, you check your emails, read the news online, and perhaps even listen to a podcast. On your way to the office, you use a ride-sharing app to book a ride, and once you get there, you log into your computer to start the workday. Today, it is a common scenario, and it illustrates just how deeply the internet and digital technology have woven themselves into our daily lives.

In this digital age, it is crucial for a country to have a strong digital infrastructure and widespread adoption of technology, and India is setting the benchmark for the world.

Digital India – the trending theme

Digital India was first coined when PM Narendra Modi launched the initiative on 1st July 2015. Since then, events like Demonetization, UPI, GST, and the pandemic have propelled the digitization wave across the country. As the government and corporations started building the infrastructure for Digital India, innovations started growing in every nook and corner of the country and India’s GDP surpassed its former colonizer for the first time to take the reins of the world’s top five GDPs.

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As appealing as any tale may seem, numbers keep us grounded. Here are a few astounding data points that back up the broad assertions that many astute investors are making in the market while betting on this theme for the coming years.

Multiple data points indicate that India has made significant progress in terms of digital friendliness since 2017, and the future also looks bright. The government aims to enhance the digital economy’s contribution to 20% of GDP by FY ‘25. As we inch closer to the $5 trillion mark for GDP by 2025-26, ~$1 trillion in GDP from the digital economy is a highly promising projection for the government and businesses to aim towards.

If the aforementioned target is achieved within the specified timeframes, we may witness exponential growth in the industry, opening several wealth-generating possibilities that an investor should look forward to pursuing.

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Ways to invest in the ‘Digital India’ theme

Tech-first consumer internet companies like Zomato, Policy Bazaar, Nykaa, etc. recently went public and may be the direct choices. Taking advantage of the country’s favorable population demography, whose residents have the will and capacity to spend aggressively, these firms claim massive TAM and growth potential to gain market share from established competitors. Although the market price performance of these firms has not been promising since their listing, supporters of the theme see these developments as minor hitches on the route to wealth accumulation in the long term.

With many IPOs in the offing and companies foraying into the secondary market, these provide lucrative options for investors. Then this theme can also be played through proxy businesses. If we were to list every sector of the economy and area that has profited directly or indirectly from digitization, we would run out of paper. However, sharing a few instances of businesses taking advantage of this:

• Cost optimization by automating operational processes
• Reduced working capital requirements and shorter lead time
• Cheaper and smoother customer acquisition
• Enhanced customer experience
• Unlocks business opportunities in newer geographies and business verticals.

An investor’s job, in this case, is to discover businesses that have been employing digital tools to better run their businesses and profitably grow at rates quicker than their peers. These businesses can originate from any industry and serve any consumer group as long as they continue to spend extensively in developing their digital capabilities. These are the jewels that will upset traditional brick-and-mortar enterprises’ present business methods as they tread on their path to long-term wealth creation.

Identifying and tracking businesses with such traits can be tough for an investor who does not have enough time and resources to devote to this dynamic game. This is where curated portfolios by SEBI registered professionals such as WealthBaskets come in for the rescue, as it helps an investor not only take the right investment decisions but also achieve their desired financial goals.

So, any investor who plays the Digital India theme well with the right guidance will emerge as a beneficiary in the long-term wealth generation goal.

(By Vaibhav Jain, CFA, Head – WealthBasket Partnerships and Content Strategy, WealthDesk)

Disclaimer: This piece is only informational and investment decisions to be taken after independent research and consulting your financial advisor.