Daily Voice | Manufacturing, deep tech, exports should be key themes for the post-election government: Utkarsh Sinha

Utkarsh Sinha is the the Managing Director at Bexley Advisors

Utkarsh Sinha is clear about the roadmap that needs to be charted in the post-poll scenario. "Manufacturing, deep tech, and exports should be the key themes for the next government," the Managing Director of Bexley Advisors, a boutique investment bank, said in an interview to Moneycontrol.

He believes that India is uniquely placed to leverage its large tech talent base to assume global leadership in deep tech.

Sinha, who has nearly 15 years of experience as a banker, hedge fund manager, and management consultant, thinks that India could see unparalleled growth in the next two decades.

"No other economy of our size and  demographic strength has experienced the twin benefits of technological advantage and socio-political stability. The results could be spectacular," he said.

Edited excerpts from the interview follow.

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Utkarsh Sinha

Managing Director|Bexley Advisors

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  Daily Voice: Markets likely to deliver double-digit gains in 2025, says Bexley's Utkarsh Sinha

Which emerging themes aren't getting much love from investors at the moment, but are likely to create multi-baggers in the coming years?

India’s economy is at an inflection point that’s seen once in a century. China experienced it in the last two decades of the last century, once its economy began opening up. The USA experienced it in the post-war years. India’s momentum began post liberalisation, and is now kicking into high gear. The next two decades can see unparalleled growth: no other economy of our size and demographic strength has ever experienced the twin benefits of technological advantage and socio-political stability.  The results could be spectacular.

India is seeing a very silent emergence of deep tech (including space tech, med tech, health tech, and several other themes). Most of the activity in this space is currently limited to private investment in early-stage firms,  which will likely bear fruit in the next decade or so.

One very encouraging sign is the growth of private activity in defence: globally, defence spending has been one of the most important enablers of tech innovation, and India could see a boom in that space soon.

Similarly, manufacturing represents a tremendous opportunity. It was hard to imagine a few decades back that I’d hold an iPhone that was made in India, not China. We are seeing a similar push in EV manufacturing. The sector, though, will continue to need a tremendous push. We need to make for the world, and that will lead to a massive transformation of smaller towns and villages. It will stem rural migration and create a middle class that is willing and able to consume where they live. It will set off a chain reaction that can transform generations.

Do you expect major rural recovery in the later part of the year?

The largest untapped opportunity lies in India’s rural sector and somewhat  in manufacturing. We have barely begun to scratch the surface of the nearly a billion strong sub-tier-2 India. So far, there were good reasons not to go there: the digital and physical infrastructure lacked maturity, banking penetration was low, and transaction sizes were small. All of these are changing dramatically. A predominantly cash based economy is increasingly coming online, which makes access to rural India a lot easier. especially as every individual is or will soon be at least on a 4G connection.

As much as there is a pull factor, there is also a push factor away from Tier 1 / 2 India, especially for digital disruptors: the urban wallet has been squeezed to the last rupee, and if you want to claim any marginal gains, these are better sought in newer, smaller markets.

Once rural recovery starts, it triggers a virtuous flywheel with increased jobs, opportunities, and growth, which in turn spurs more industries to access the rural market. Rural India is very much the untapped base of the iceberg.

On a more short-term basis: election years often see a splurge in rural spending, driven by government push on infrastructure and direct benefit transfer schemes. We shall see the lagging effects of this on consumption this FY.

Which segments should the government should focus on post elections?

India needs to focus on creating a broader and more spread-out middle class. The key to doing that lies in raising agricultural productivity and creating manufacturing jobs, particularly in export-oriented sectors.

The next government should  focus hard on solving problems that entrepreneurs and MSMEs face when it comes to establishing a new manufacturing unit — be it land acquisition, regulatory clearances, export clearances, or simply accessing the skilled workforce needed to be competitive.

It is equally critical to take a focussed lead on deep tech. This  is a combination of long and short-term policy moves. The two flagship government fund-of-funds (administered by SIDBI, and NSIC’s SRI fund) have been instrumental in seeding the tech story of India. We need similar funds for deep tech, which will create the next wave of disruptive VCs in AI, ML, biotech, space tech, and a number of other priority areas. Similarly, a fund-of-funds for manufacturing is critical.

In the longer term, the government must overhaul its approach to education and skills so that we continue to produce both the workforce and the scientific talent that is needed to take and maintain a lead in deep tech disruption.

To summarise: manufacturing, deep tech, and exports should be the key themes for the next government. Enabling a robust manufacturing sector that's export-oriented (as global supply chains are re-orienting) is paramount. We also need to go all in on deep tech using our diverse talent base, and open up aggressively to sell to the world (Indian solutions for global problems).

Do you think the Fed's rate cut is the only thing that is keenly awaited globally?

Rate cuts are part of a complex, multi-variate problem: currently, the world is largely inflationary and is likely to remain so for a while. Rate hikes were initiated at a time when the geo-political regime was quite different from the one we confront today, with two large conflicts underway, which may escalate into a global conflict.

The disruptions to global supply chains and energy markets that these global conflicts pose are a significant factor for policy makers to consider.

2024 also happens to be a year when a significant number of nations are going to the polls, which can trigger significant shifts in national policies.

These factors point to a lot of uncertainty, and the need for firm yet nimble hands at the wheels driving macroeconomic decisions.

Is gold looking very expensive now? Why is there so much demand for gold?

Global uncertainty is certainly contributing to the gold rally. We have a situation where nations fighting runaway inflation are  returning to the gold standard for the first time in decades. China and others are building their reserves, further driving up prices. And to top it all, this is a year when more than half the world's population  is determining their fate in polls, in the middle of a rather inflationary macroeconomic outlook. This is all driving a flight to the safety of gold.

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