India’s digital revolution offers wealth of opportunities for foreign investors

India surpassed Britain to become the world’s fifth largest economy in the final months of 2021, marking a milestone achievement for the country. On Wednesday, India’s financial minister, Nirmala Sitharaman, also asserted that their digital revolution in the retail and manufacturing sector has created numerous business opportunities for foreign companies. She added that the Indian government was engaged in dialogue with foreign backers to ease regulations for investments, which will likely increase the scope of collaboration between different economies.

This comes as the London Stock Exchange (LSE) continues to fall down the international ranks, with the nation in the midst of an energy crisis, a brutal living squeeze, and the highest rate of inflation in four decades. India – set to become the fastest-growing economy by the end of the year – is already projected to be a fifth larger than the UK by 2027, according to the International Monetary Fund (IMF). With this in mind, Nayan Gala, founder of JPIN, the largest bilateral investment banking platform across the UK and India, explains why India has experienced such a fast growth, and how the LSE can maintain their competitive edge in a post-Brexit era.

On the last day of Q4 in 2021, India’s economy stood at $854.7bn, whilst the UK’s was at $816bn, marking a significant turn of events compared to a decade ago, when India was ranked 11th among the largest economies, and the UK was fifth. India’s inflation rate sits at almost 7%, however the country remains confident of handling the challenge, with the financial minister stating that its economic revival was driven by government reforms. In comparison, inflation in the UK currently sits at 10.1% and is set to continue soaring into 2023.

Dubbed as Asia’s Silicon Valley, India is home to some of the world’s most successful CEOs, who are at the helm of steering global conglomerates such as Alphabet, Microsoft, Twitter, Adobe, FedEx and most recently, Starbucks. The economic powerhouse is already one of the top destinations for investors looking for tech startups and despite global ‘stagflation’, India continues to thrive in development, IT and digital technology. Currently boasting over 100 unicorns, it is producing one every ten days and will be instrumental in supporting the UK’s tech growth in the coming years especially after the Free Trade Agreement is passed.

In comparison, a chairman of the London Stock Exchange (LSE) has recently warned that the UK must act fast in “tearing up decades-old orthodoxies and water down a host of stock market rules” to ensure that London remains a relevant destination for flotations and capital raisings. He added that the capital is no longer the “default” European venue for listings and equity raises, and that the LSE, once flying with the likes of New York, Shanghai, and Tokyo, could diminish to that of a regional exchange if it continues to shrink at the current pace. Although Brexit has presented a vital opportunity for the UK to branch out towards markets outside of Europe, experts have asserted that this should also work alongside the implementation of radical reforms to ensure that London persists as a relevant destination for flotations and capital raisings.

As of June this year, the number of companies trading on the LSE stood at 1,900 – a slight decrease from 1,994 during the same time last year. For context, negotiations regarding Brexit first started in 2016, when the number of listed companies on the LSE reached 2,348 in January that year. London has traditionally been known as the world’s most international stock exchange. In 2020, 25% of the world’s cross-border IPO capital was raised in London, and three of London’s five largest IPOs were international. In comparison, only 13 listings took place in the first six months of this year, raising just shy of $150m – a staggering 71% and 99% decline on the last two years respectively.

Nayan Gala, investment specialist and founder of JPIN, comments on India’s fast-growing economy and how the UK can maintain its competitive edge:

“Despite a few dips in the past two years due to the effects of a pandemic and an ongoing war, India has continued to show signs of real development and record economic growth – which has resulted in a huge leap ahead of Britain.

“This monumental moment clearly illustrates how companies hailing from the country are successfully positioning themselves for the changing landscape in technology. As one of the leading hubs of IT and technology, I expect to see an increasing number of investors turning East in search of the startups that could shape the future of the global economy.

“London has always been an attractive destination for companies looking to go public, with a particular interest from international businesses. The last few years have evidently presented a few challenges – but now, particularly with the opportunities Brexit has provided, there are some outdated aspects of the UK’s stock market regulation that could also be reassessed to present further opportunities. This will likely assist with boosting the stock volume, value and quality, and could result in a significance bounce back of the LSE.”