One21.AI (Formerly Flookup) retweetledi
The next 10 years are going to be challenging for Indian Stock Markets. Why? SHORT-ANSWER: because India is not needed in the AI race.
Let me explain why:-
1) Economies get shaped & reshaped around technologies.
Right from Dutch Shipbuilding to
UK's Industrial Revolution to
US's factory automation models,
It is the "innovation" which creates new wealth.
Wealth does not appear out of thin air. It is systematically build on the back of technological innovation.
2) Innovation also follows something called: Hub and Spoke model. This means that their will be 1-2 main Hubs. These create prosperity around the world.
Around these hubs, many spokes are created. A current example would be: China (a hub), Vietnam/Thailand (spokes)
This hub and spoke model worked well for India in the last 2 decades: US F-500 required IT backed (Pune, Hyderabad, B'lore became spokes)
3) Every few decades: new technologies pick up, new hub-spokes get formed.
4) So what's the next hub and spoke model? And, what does it have to do with the Indian stock market? (read on...)
It is quite obvious that: AI is big. Very similar to how internet was big in the late 90s.
AI is shaping almost everything as we speak: right from giga-factories, space exploration, energy requirements, compute power, LLMs, personalized learning etc.
In fact: practically speak, if you go back 5 years: you would often hear -- that everyone should learn coding. But, with the advent of AI: anyone can technically reap the benefits of coding, without being a coder.
This is massive.
5) Smartest investors/entrepreneurs/biggest tech firms are all betting big on tech.
China and US: are in a AI race.
China has already built massive energy reserves (US is catching up)
US has already built massive tech reserves (and one could argue China is catching up)
This is the new arms race.
6) It is often seen: that economies that do NOT participate in innovation, end up falling behind the curve. Why?
Now genuinely, try to answer the question: why is India needed in this AI race?
1) Data harvesting? (well, this stage is already done)
2) Can we lower the cost for AI infrastructure? (we have very high cost of energy and poor leakages in infra; so we can't). We can't build giga-factories. This is the reason why our manufacturing sucks.
3) Can we provide a great market for end consumption? (well paying capacity is fairly low; this reflects in per capita GDP). Getting users to pay 20$/month is a challenge for LLMs right now.
So at a broad level: we don't have a cost advantage (like China) for production. Or a high paying customer (like the US). So where does India fit in the AI race?
Now of course: as the world becomes more productive. India will benefit too. That's obvious. Standard of living will improve. But, "compared" to other countries, it will fall.
Also, we will have pockets where our economy will grow. Eg. Zomato might start drone deliveries (huge cost advantage to them), when the world is running on aerial taxis. Startups will come from time-to-time, that will capture your attention.
But, if you go back to the base question: we are nowhere close to becoming a hub of innovation. Decades of regressive economic policies, unnecessary pride and inability to look at things rationally has put us into this situation.
All this will reflect into the stock market.
There is a reason why since 2020: FIIs have been consistently existing our markets.
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