The Last Decade of Indian Private Equity & Venture Capital

Historically the Indian Financial Markets have had certain hot investments that everyone wants to invest in. For the longest time, it was Gold, then came Real-Estate and Cryptocurrency. But the last decade was dominated by Private Equity and Venture Capital Investments. These investments have flooded the markets with billions of dollars, funding innovative ideas, honing entrepreneurial skills and creating a multitude of wealth for those brave enough to make these risky investments.

History of PE/VC in India

Preceding 1997, the Indian private value market was tiny and generally dependent on official financing from the Government and multilateral organizations like World Bank, IFC, CDC and DFID. The growth was seen during beginning of the dotcom boom with the entry of foreign institutional financial backers (FIIs) VC financing was first introduced in India during the year 1975 with the setting up of Industrial Finance Corporation of India (IFCI) supported Risk Capital Foundation (presently known as IFCI Venture capital Fund

Limited). In 1976, a seed capital plan was presented by The Industrial Development Bank of India (IDBI). In March 1987, IDBI introduced a venture capital fund scheme for financing ventures seeking development of indigenous technologies/adaptation of foreign technology to wider domestic applications. Similarly, ICICI in association with UTI formed a venture capital subsidiary Technology Development and Information Company of India (TDICI) for financing technology oriented innovative companies. In mid-80’s all the three Indian financial institutions viz IDBI, ICICI, IFCI started investing equity in small technological companies.

Let’s breakdown the growth on PE/VC into multiple Phases:

 Phase -I Pre – 1995Phase – II 1995-1997Phase – III 1998-2001Phase – IV 2002-2009Current 2010-2021
Number of Active PE Funds82050753000 +
Total Investments (US$ Mil)~30~125~3,000~7,000~240,000
Stages & SectorsSeed, early stage and development – diversifiedDevelopment – diversifiedEarly stage and Development – telecom and ITGrowth/ Maturity – tech, financial services, infra and industrialsGrowth/ Maturity/ Credit/ Distress/ Buyout/ Platform – financial services, infra, RE, tech, healthcare, consumer
Primary Sources of FundsWorld Bank, GovernmentGovernmentOverseas InstitutionalOverseas InstitutionalOverseas Institutional/ Domestic
No. of Transactions~20~65~548~1,500~7,000

The Last Decade (2010 – 2020)

This decade saw PE/VC investments develop at a CAGR of 19% from a base of US$ 8.4 billion out of 2010 to US$ 47.6 billion every 2020 and spread its wings across all venture classes. The combined worth of PE/VC investments between 2011-2020 added up to US$ 232.4 billion, which is over two times the worth recorded in the previous decade. This decade saw numerous changes in the Indian PE/VC industry concerning the deal type, deal size, and industries.

Top Large PE/VC Deals between 2010-2020

Brief Analysis of Sectoral Performance (2010-2020)

The PE/VC investment activity in India has been dominated by four-five sectors that accounted for 2/3rd of all investments by volume and value. Some of the key trends were as follows:

  • Technology has been the most preferred sector over the years.
  • While e-commerce sector was among the preferred sectors throughout the decade, the deals were much smaller in the initial years.
  • Financial services and real estate have consistently been among the top five preferred sectors for PE/VC investments.
  • Infrastructure sector has received a disproportionate share of capital despite very few deals over the decade.
  • Media and entertainment sector has seen an uptick in deal activity in recent years, though the deal sizes are rather small.
  • Healthcare was among the preferred sectors in the initial years but fell behind in the latter half of the decade. This is expected to change after the Government’s focus on increasing healthcare investments and renewed interest from PE/VC funds in the healthcare sector post the pandemic.

Outlook for the Next Decade

  • Technology enabled businesses will see disproportionate share of investments: 

As technology takes over all parts of business and life, it has turned into a significant tool for disturbing the status quo. Considering recent patterns, early movers in technology-empowered organizations are relied upon to get a disproportionate share of the market. Accordingly, organizations that are at the cutting edge of innovation will doubtlessly have an upper hand, and PE/VC reserves are understanding that. The previous year has shown us the sort of valuations techempowered business can order, and their capacity to be stronger to financial shocks.

  • Environmental, Social, and Corporate Governance (ESG) focused investing:

Investors are using these non-monetary variables as a component of their analysis to distinguish risks and opportunities. The Covid pandemic, specifically, has escalated conversations about the interconnectedness of sustainability and the financial system. Many funds have already

incorporated ESG policies in their investment decisions, a trend which will grow stronger in the next decade. Indian PE/VC investors will in time, be expected to make ESG an integrated part of a company’s DNA and its operations.

  • New sectors to emerge as frontrunners for PE/VC investments: 

Most conventional areas are being upset by innovation and new business models have arisen. The most conspicuous among them for the following decade appear to be edtech, fin-tech, health tech, EVs, independent transportation and customised media and amusement. These sectors will play an instrumental role in the upcoming decade.

Author

Udit Bagdi

Editor-TJEF

Gati Shakti

Prime Minister Narendra Modi launched the PM Gati Shakti Master Plan, a project worth one hundred lakh crore rupees, on the auspicious day of India’s 75th Independence Day. Our government has drawn out a comprehensive infrastructure development strategy that includes a multimodal connectivity plan with the goal of coordinating the planning and execution of infrastructure projects to decrease logistics costs and accelerate growth.

I’ll use a popular example to try to convey the essence of this initiative. We’ve all witnessed how our local corporation or government maintains and develops roads. After completing the road, it is dug up again within some days for the installation of a plumbing system or maintenance work, among other things. This occurs not only on a small scale in a town or city, but also in huge undertakings, causing delays in both time and budget. Because our work is done in silos, there is a large gap between our planning and implementation. Gati Shakti is attempting to address these and other challenges by developing a unified platform that will allow for the easy planning and management of all infrastructure projects.Let’s take a closer look at why this project is important, what Gati Shakti is, and how it will impact the entire DNA of government administration & what are the implementation difficulties?

The relevance of infrastructure development, according to the RBI, is that it not only improves capital’s marginal productivity, which increases return on investment, but it also has a multiplier effect on the entire GDP. It helps to drive industries including cement, metal, auto, and electrical by increasing labor demand, construction equipment, and supplies. It improves commodities transit, lowering overall logistics costs and improving service. History demonstrates how countries, such as the United States and China, have transformed themselves through infrastructure development and become economic superpowers. India is now taking moves in the same direction, which will provide opportunities for growth.

Second, Gati Shakti is a GIS (geographic information system)-based platform that will connect all our country’s commercial and industrial clusters. Roads, railways, communication cable networks, oil and gas pipelines, water supplies, and other infrastructure will be connected to the platform. A fully integrated system that will serve as a project design and management platform that will aid in both planning and monitoring. The lacking links between several ministries that implement projects without consulting their related components would be fully removed. If a project is being rolled out, it will now have a well-rounded system of approvals thanks to the Gati Shakti platform, which will not affect any other project in the future. This platform will be taught to ministries and government officials. A national planning group coordinated by the Ministry of Commerce and BISAG (Bhaskaracharya National Institute for Space Applications and Geoinformatics) will bring expert officers to represent the ministries and assist them with efficient platform usage. No solo project will be sanctioned without proper funneling after the adoption of this platform, and NPG will be involved in every clearance.

Third, the Ministry of Infrastructure encompasses a total of 15 ministries, all of which have a significant impact on every part of our economy. The government will be able to efficiently control all these departments by leveraging the power of growing technology. This improvement will not only result in a more efficient system, but it will also revolutionize the way government functions. The entire administration could have a good impact since a transparent system will steer growth, potentially giving more power to those working on the ground.

Finally, the issue is to combine the massive amounts of data generated by all these ministries, as well as to train individuals on how to use and execute the system. The goal of developing a digital system for project management is to provide transparency, and in order to do so, everyone will have to work together to develop the system.

This initiative by our government, in my opinion, has the potential to transform India into a manufacturing powerhouse and is one of the most important stages toward our objective of becoming a $5 trillion economy. This can become a foundation for future development & if correctly implemented, a system of this magnitude can attract more companies to our country and put us on the path to growth.

Gati Shakti Master Plan

Author
Pranav Dorle
Editor-TJEF

FRAUDS IN BANKING SECTOR

Banking post-nationalization has progressed unexpectedly. With new reforms in the banking sector, more emphasis was given on lending so that economy of the nation can be improved.   But it also exposed banking to risks and frauds. Banks are the backbone of the economy. Any disruption in banking poses threat to the economy and therefore citizens.

“Reserve Bank of India defines banking fraud as an act of commission /abatement, which is intended to cause illicit gain to one person(s), entity and wrongful loss to the other, either by way of concealment of facts by deceit or by playing a confidence risk.”

The numbers and values of frauds keep on accelerating with every financial year. In the financial year 2019-20, the bank frauds (value Rs. 1.85 trillion) were more than double of the bank frauds that were reported in 2018-2019. The number of frauds was increased by 28%. The top 50 credit-related frauds constituted 76% of the total amount reported as frauds during 2019-20. Public sector banks accounted for 80% of the total value of frauds in this fiscal year. The private bank followed it by 18% and foreign banks with 2%. Although the total frauds reduced in the financial year 2020-21, frauds in private banks increased up to 21%. (Refer Table)

These frauds are spread over several years and are accounted for in the financial year they are reported. On average, banks took two years to detect fraud after it had occurred. The delay was even greater for frauds greater than Rs. 100 Crore with a time of 5 years. There have been instances in the past where banks were found not following the protocols needed while sanctioning any kind of loan. Harshad Mehta Scam was one where he got hand-in-glove with bank employees to get fake bank receipts. Satyam companies manipulated the financial statements and issued fake bank statements to purchase more land for their projects. Vijay Mallya borrowed money from 13 banks and did not pay in time. The discrepancy happened due to a lack of diligence in the process of consortium lending. The recent one is Nirav Modi PNB Scam. The bank manager sanctioned the loan without following the process.

The fraud reasons are not limited. Any mishandling of data and manipulation in process at any step can lead to the formation of higher Non-Performing Assets. Many of those take place due to the interference of corrupted third parties like auditors, controllers, and chartered accountants. Poor Internal Management also factors these frauds. When banks and employees do not follow the proper identification method and regulated assessment, it results in fraud. Due to a weaker selection process in banks, employees are not well qualified for loan assessment. RBI recently has given detailed guidelines for recruitment of employees for recovery of loans. The recruited ones will be given 100-hours training to deal with these going to be “bad debt”. Such initiatives are needed even while recruiting employees who are responsible to process the loan. In many cases, the purpose of the loan is manipulated. The loan amount received by the borrowers was not utilized for the approved project. In cases like Nirav Modi and Harshad Mehta Scam, collusion with bank officials resulted in big frauds. Weakened Business Model: Sometimes banks lend money for a project without calculating the potential of the project. Bank’s official lack in their analysis of the project. Due to this, an enterprise might go into losses and would not be in a position to pay to back its creditors. Banks at times, do not make these frauds public to prevent their goodwill in the market. In those circumstances, the amount of loan increases with negligence. When added up to a huge amount, the case is held over to Apex Court which further increases the cost on banks. With the emergence of digital banking, banks as well as the public are more at risk. RBI regularly updates customers with advertisements and guidelines to avoid these crimes. Banks have also switched to online sanctioning of the loan, so they are required to verify every document closely.

The impact of these frauds hits the financial statement of the bank first and then the economy as a whole. When an account is declared fraud, banks need to provision 100% of the outstanding loans. The provisioning is generally done in one time or four quarters. The profitability and credibility of a bank are impacted adversely. When banks face the issue of liquidity, a limit is imposed on the withdrawal of depositors. As frauds are not new in the banking context, RBI and the government has formulated many laws and acts to avoid fraud. Banks have an option to securitize the assets of the company that committed the fraud. The Debt Recovery Tribunal (DRT) was formed under “The Recovery of Debts and Bankruptcy Act,1993 to deal with loans related to the agriculture sector if the loan amount is 10 Lakhs. Banks also have Corporate Debt Restructuring framework in place to ensure a timely and transparent mechanism for restructuring the corporate debts above 20 Crore. Some of the laws against fraud are mentioned below.

  1. The Indian penal code,1860
  2. The Negotiable Instruments Act,1881
  3. The Reserve Bank of India Act,1934
  4. The Banking Regulation Act,1949
  5. Criminal procedure code,1973
  6. SARFESI Act,2002
  7. Insolvency and Bankrupt Code,2016
  8. Fugitive Economic Offenders Act,2018

RBI has taken several measures to avoid fraud and deal with fraud. Banks are required to categorize accounts for better risk assessment and to implement provisioning norms. Accounts can be classified as Special Mention Accounts (SMA), standard Accounts, substandard Accounts, doubtful accounts, and Non-Performing Accounts. Constant review of the transactions, identifying and tracking the patterns of transactions should be constantly done. RBI regularly comes up with updated frameworks that are to be followed to prevent, detect and mitigate frauds gravity.

As per RBI’s latest report, there is a list of 42 early warning signals. The presence of any of these, in any case, will mark that account as a Red Flag account. This will trigger the detailed investigation of an account which can save the bank from fraud.RBI has also put in place the three stages of the loan life cycle which should be followed for early detection. The three stages are pre-sanction Order, disbursement, and annual review

  • Pre-sanction Order  
  • – Banks should follow and track Anti Money Laundering Norms, accurate CIBIL Credit Scores, involvement in a legal dispute, due diligence on the borrower’s antecedents, set margins as per MCLR, and check whether the loan is recoverable.
  • Disbursement: While disbursement of the loan amount, banks are required to mention terms and conditions to the borrower. Borrowers and Banks should adhere to these norms so that the core purpose of the loan could not be diluted.
  • Annual Review: Monitoring EWS and reassessing the value of prime and collateral underlying.

RBI has also imposed penal measures on Fraudulent Borrowers-. In case of willful default that accounts for the high value of Frauds, RBI with CBI and Supreme Court can impose these penal provisions. Under Securitization, Banks can acquire the assets borrowers want to securitize. Banks can trade on that asset (via pass-through certificate) and recover the loan amount. Banks have also an option to repossess the asset. Banks can take control over the prime and collateral for the recovery of loans. Banks can give time to borrowers for repayment of loans. If it is not done in time, Banks can auction it to recover the loan and repay the excess amount from the auction sale to the borrower.

Although RBI updates frameworks as per the demand in banking loopholes, it has still not served the purpose to solve cases of fraud due to lack of diligence in bank employees, less transparency, less accountability, and ineffective implementation of this framework. The proof of this is the increase in the percentage of frauds associated with private sector banks. The repo rate (4 % currently) for the bank and the interest rate for the loan takers are comparatively low. This makes it attractive for people to borrow money. Banks should be cautious enough in these circumstances because some people or entities can manipulate their documents to get a loan at a cheaper rate. 

Despite the annual review, the banks should collect interim reports of the financial status of high credited accounts to get a clear picture. Credit scores need to be considered while giving any loan. Actions against Early Warning Signals should be taken strictly. The reporting of fraud cases should be done proactively so that it does not accumulate to huge losses for banks as well as the economy. Most importantly, RBI has to ensure that the guidelines issues are implemented and followed. That is where the complete banking system is lagging. Those rules and regulations have to come out from documents in action in reality.

Editor
Swati Shubham

Balance of Payments Crisis 1991: An Eventful History

The Balance of Payment crisis in 1991 is undoubtedly, one of the most critical events to take place in the history of Indian economy and politics. The valiant effort in managing the crisis by the then incumbent government, steered India onto the path of economic liberalisation and prosperity. 

In hindsight, this watershed event can be viewed as a blessing in disguise for India. The confluence of bureaucracy, academia, institutions worked so well to pull India out of the crisis trench. Simplistically, one can understand that India went into the pitfall of the BoP crisis as it was unable to pay off its debts. But sometimes, it is fascinating to delve into the ‘why’ part of such an even happened. Why did India descend into such a situation? What were the warning signs? Did the policy was adequate enough to prevent the systemic risk, etc?

These were some pertinent questions that led me to delve deeper into the reasons and get a better understanding of it. Let us traverse through the series of the following activities that led to the creation of the crisis.

India had been significantly under pervasive administration control and its economy policy exhibited a strong inward orientation until early 1980s. The first half of 1980 saw a large increase in the central government’s deficit, primarily on account of high expenditure levels especially on agricultural subsidies, defence, and interest payments. On external account, higher imports dominated over exports. The Current Account Deficit (CAD) widened extensively due to higher import bill. The dependence on commercial financing increased significantly. The debt service ratio reached almost 30% (i.e. India had already used 30% of the total borrowed funds) in the late 1980s. The fiscal deficit as a percentage of GDP escalated to 9.4% in 1990-91 as against the average of 6.3% in the first half of 1980s. The increase in the money supply contributed to rise in the inflation and exerted pressure on the BoPs. The bulk of the outflow of funds amounted to nearly US$ 1 billion during April-June 1991. During 1988-1990, external commercial borrowings rose. The reliance on non-resident deposits continued with interest rates rising above the international levels. The perception towards external financing to be a stable source of funds resulted to be a whammy.  India faced large external and internal financial imbalances and was vulnerable to external shocks around 1990.

India’s tendency to extensive reliance on external financing and resorting to financing on commercial terms during 1980s resulted in relatively high debt at the end of the decade. The official reserves were drawn from 5 months of imports in the mid-1980s to a little over 2 months of imports at the end of 1989-90. Reserves declined by 71.2% from Aug 1990 to Jan 1991 (US$ 3 billion to US$ 896 million). The gross official reserves stood at US$ 5.8 billion (1.3 months of imports) by March 1991 despite purchase of US$ 1.8 billion from IMF in January 1991. Inflation rose to 12% while CAD widened to 3%. 

The situation exacerbated further due to sudden outbreak of the gulf war, annexation of Kuwait, higher oil prices, loss of workers’ remittances, policy slippage, domestic political unrest, postponement of the general elections followed by the resignation of the government in power in March 1991. The withdrawal of NRI deposits intensified during

1991-92. Exports stagnated largely due to slack in demand in key markets in Eastern Europe and the Middle East industrial nations. India’s sovereign credit rating was seriously downgraded. The burden fell mainly on monetary adjustments and direct import compression measures. 

By the mid-1991, the BoP crisis turned into a crisis of confidence and India’s default on its debt obligations seemed as a certain possibility in June 1991. India’s external liabilities stood at US$ 68.8 billion at end March 1992.

Management of the crisis and its resolve

The crisis presented the policymakers with the opportunity to pursue liberalization. The then Prime Minister P.V. Narasimha Rao roped in Dr Manmohan Singh as the Finance Minister to undertake economic reforms and embarked upon a historic economic transition of India along with their administration by abolishing License Raj and introducing liberalisation. 

Here are the key highlights of the reforms-

  • Industrial licensing was abolished (except for 18 industries). 80% of the industry was taken out of the clutches of the licensing framework.
  • Reforms in capital market, trade, infrastructure, and financial sector took place.
  • Automatic approval of FDI was done up to 51%. 
  • Public sector units were given more autonomy. Disinvestments in many PSU units were initiated.
  • Investment caps on large industrial houses were removed. MRTP act was revoked to foster capacity expansion and diversification.
  • Exporters were permitted to open Foreign Currency Accounts.
  • Access to foreign technology was liberalized.
  • Import licensing was abolished. 
  • Import duties were sharply reduced.

In October 1990, RBI imposed higher cash margins of 50% on imports, other than capital goods, for those against foreign sources of credit. In 1991, the cash margins increased further to 133% and 200% in March and April respectively. The government imposed surcharges of 25% on prices of petroleum products and also raised customs duties. RBI imposed 25% surcharge on interest on bank credit for imports. The measures undertaken resulted in significant import compression. Though it proved to be counterproductive as it affected exports. 

The Rupee (₹) was devalued by 18% in 2 phases- on July 1st and July 3rd ,1991. The dual exchange rate system was introduced in 1992 to contain the exchange rate volatility. The large outflow of funds was recouped to a large extent by subscription to India Development Bonds (IDBs) aggregating US$ 1.62 billion with bonds having elongated maturities. India received financing from World Bank, ADB and Japan aggregating US$ 1billion. Aid-India consortium committed aid during 1991-92 amounting to US$ 6.7 billion for India. The value of the gold holdings with RBI was at US$ 3.5 billion during 1991-92. The RBI in consultation with the government evaluated the value of the gold reserves to raise foreign exchange resources. The arrangement to utilise gold was done with the intention to be temporary as well as reversible.  As means of raising resources, RBI in 1991 pledged 47 tons of gold with Bank of Japan (BoJ) and Bank of England (BoE) to raise a loan of US$ 405.0 million. United bank of Switzerland (UBS) purchased approximately 20 tons of gold and paid a consideration of US$ 200 million to the government. Finally, the IMF approved credit tranche amounting to US$ 2.2 billion to be availed in instalments over 20 months under the 1991-93 stand by arrangement subject to the conditionality imposed by IMF. 

The successful management of the BoP crisis succinctly shows the vigour of the government under the leadership of P.V. Narasimha Rao that India was in no way to default on its debt obligations. The government was adamant to rebuild the sovereign rating of India and restore the market confidence on the Indian economy. The measures were taken prudently to weed out the crisis gradually. The co-ordinated financial aid received by India from global financial institutions was the result of strategic negotiations and collegial relationship nurtured between Indian administration and the institutions over the period of crisis. The incipient impact of the reforms undertaken was evident as the foreign exchange reserves had climbed to US$ 9.8 billion by the end of 1992-93 and economic growth had recovered to 4.0 percent. The fiscal deficit reduced from 8.4% in 1990-91 to 5% of GDP in 1993-94. In 2003, India successfully repaid its debt that it received from the IMF under the 1991-93 stand by arrangement. Through the end of the decade, India didn’t have to borrow. 

As the times have progressed, India has become a favourable destination for the FPIs, FDIs. The world is converging in India. It currently ranks 5th on the list of the world’s biggest economies. It has gained the precious tag of the” fastest growing economy” among the major economies in the world. So much for an economy that once faced the risk of defaulting on its debt commitment, gaining the title of the  fastest growing economy in 2018-19 is a feat unprecedented and a matter of pride for us fellow Indians.   

Digital Speculation & Economy

Let us understand the entire volume of money in transaction and try to ask a few questions? What is the Global GDP? How much is the world’s richest person’s share as compared to the total wealth?

A huge corpus of the money is floated around from person to person everyday – people buying at a price just to sell off to another person offering a higher price. A comparison with All Money in the bubble gives us an understanding how big a part – Digital Speculation of Financial Market is!

Ever wondered how stock price fluctuate? And what exactly is demand and supply affecting the market price to move up and down by the second?

It’s basically the bid and offer price. At any random given time, we have a number of buyers willing to buy a stock and a number of sellers willing to sell the stock at any given price. The exchange puts these ‘limit orders’ in a tabular form and decreasing order of “Buy Price” and increasing order of “Sell Price”. Bid price is the highest price (highest auction price) one is willing to pay to buy a stock. Offer Price is the least price (lowest sell price) one is willing to sell for this stock.

This is what we call the market depth. Generally, this bid price and offer price are very close to one another and offer price is slightly above bid price at any given time. This is called the Current Market Price (CMP): Offer Price for a buyer (because he will buy from the lowest seller) and Bid Price for the seller (because he will sell to the highest auction bidder).

How markets move? It’s generally BUY and SELL power. Huge buying will clear off all levels of Sell Price at the exchange and fresh bid will come thereby taking the CMP higher (higher demand). Sharp selloff can make the price come down as it will clear off Bid Price levels and fresh offers will come to settle.

Market Depth and how the Bid & Offer Prices move by the second

Now understand this. What if my intention of buying is just to sell off to the next buyer? Or in simple terms, my buying decision is simply based on the interest of the next buyer. Yes, this can happen when there’s a panic buying or selling – driven by emotions and this over a few trading sessions can end up to crazy valuations. In the stock market, some stocks to be intrinsically valued at 5rs sell at 50rs and some for 50rs sell at 5rs only.

Okay, at least for an asset class that produces something (like a farmland or a company share) – you have an entry point. A PE ratio – at what multiple of its present earnings you must pay to enter the business’ ownership! What about Gold or other metals? Or Cryptocurrency?

“BTC is an asset class that produces nothing” – Buffet

The concept of cryptocurrency is unique with hashing methodologies which can prevent time, infrastructure & cost of a conventional banking system. Though the idea has some challenges and markets do see the maximum future it can – should an idea be valued at $1 trillion with a single bitcoin trading at $57,000+?

The Power of Social Media Influence

Many of these price speculations are done not only by panic buying or insider trading – it can be as simple as a tweet or post. Provided the tweet comes a personality like Elon Musk. A stock price surging 1000% or BTC gaining a hundred billion dollars’ worth of valuation over a single tweet on a single day proves a ton on how emotions are linked with the current market price we see.

A single tweet increasing valuation of hundreds of billions of dollars is what the Power of Influence is

Will the Speculative Price Bubble Burst?

We all remember the US real estate bubble of 2007. Did AIG or Lehman Brothers see it coming 2 years in future? Super high rents on super expensive houses in New York City and thousands of defaulters and collateralized debt obligations (CDOs) finally resulted in the burst of bubble and bankruptcy of a some of the world’s biggest financial institutions in Wall Street.

Can this happen to BTC? Again, forget human emotions over a brilliant idea, tweets by richest people of the planet – isn’t it too highly valued over just an idea being speculated over each trading session?

Let’s understand what a crash is.

Consider February-March downfall in world markets over Covid pandemic. Investors of the world thought it to be a disaster and since markets see as much as they can see in the future – retail investors to corporate MFs started sharp selloffs. Somewhere along the line it feels “This is the End” and slowly it persuades others to escape. The prices slowly start to be driven by emotions than fundamentals and logical possible outcomes and thereby “Panic Selling” and huge decline happens!

Similarly a bubble burst (E.g. 2008 US Housing Bubble Burst, 2000 dot-com bubble burst) happens when there is a huge rally and overvaluation of an asset driven by emotions and speculations (“People buying betting on the excitement of the next buyer”). And then suddenly the balloon bursts due to the nature of the unhealthy growth beyond logical fundamentals.

Finance amalgamated in evolving modern technology is where the world is heading towards. Maybe cryptocurrency is the universally accepted alternative for the conventional banking across the world – and maybe from 2040 to look today in 2021 BTC is still very cheap in valuation!

The Big Fat Economics of Indian Weddings

A popular Hindi movie titled “Band Baaja Baraat” based on the business of wedding planners has the protagonist speaking a dialogue “Recession ho ya inflation, shaadi toh honi hi hai” which translates to the conviction on how weddings are actually protected from any kind of economic roadblocks.

But what does actually the big fat Indian wedding entail for the entire economy? Starting with the provision of employment to a vast size of the population, to actually cause a movement of money in the circular flow of the economy ranging from gold purchases to durable goods being a part of gifts being passed on during the glittery affairs. The concept of gig-economy may have found its name during recent times but the wedding business thrives mostly on the temporary gigs that the various vendors may be a part of. Across the globe people find it to be an intriguing point of discussion, about Indians standing shoulder to shoulder as the country celebrates together. A true reflection of the colorful Indian culture actually involves the expenditure of 1/5th of an individual’s lifetime wealth. The idle money that might usually spend its major span of life in the lockers of banks may also see the light of day with these life-size events.

As per an estimation by the global media giant Conde Nast in 2013, the Indian wedding business stands at $38 billion per year which is equivalent to the GDP of a developing country. Weddings boost many industries related to wedding planners, decorators, Mehendi artists, bands and musicians, photographers, and caterers to name a few. Going by the exponential growth of the business, KPMG reports of having approximately 60.5 million weddings taking place in India from 2017-2021 which can be marginally affected since the outbreak of pandemic but if the revival rate is a model being followed and with a dropping number of active cases while the enthusiasm sores heights among individuals to turn their backs on the COVID-19 infection fears.

There has been a noticeable rising trend in the customizations of cards which has boosted the cards industry to value more than Rs. 5000 crore. The glitter is incomplete without the gleaming clothing. Designer clothing actually pushes the business to thousands of crores every year. The dreamy-eyed wedding of Indian cricket team captain Virat Kohli and actress Anushka Sharma made a lot of heads turn with the exclusively designed apparel by designer Sabyasachi. As the prominent personalities pull off these designer dresses, there is a hoard of local market players who would replicate a similar low-cost design that would be economically more reachable to a lower band of income levels as well. According to the celebrity designer Sabyasachi, the Red Benarasi saree donned by actress Anushka Sharma would flood the market with similar copies and hence pushing thousands of local weavers to enable a better living.

If the cards and clothing needed anything to complement, it is the makeup. Vivek Bharti, who heads the Bollywood-Hollywood International (BHI), a Mumbai-based make-up and hairstyling academy says that people at Indian weddings spend around Rs. 15,000-30,000 on bridal make-up compared to $150-200 in the US. While the makeup industry grows at a positive rate of 20% annually and awareness of make-up growing at a rate of 50%, newer categories of Jobs are also emerging as the professional make-up artists are being paid heavily.

There has also been a growth of startups focussed on wedding business-like ‘Wanted Umbrella’ which gives a platform for the differently-abled people to find a suitable match for themselves and ‘ForMyShaadi’ which lets the couple getting married to create a bucket list of all the gifts their family and friends. To finance the extraordinary expenses many banks and non-banking financial companies offer tailor-made personal marriage loans and financial products like wedding insurance being the new offering to cover for situations of cancellations caused due to various reasons.

The gold consumption and purchase is also a major factor during Indian weddings to make it a head-turner for economics enthusiast as Somadsundaram PR, MD of World Gold Council, India quotes “The country’s demand is largely in the form of jewelry in which 50-60% is bridal”. The clubbed effect on these variables can be collectively labelled as the “Weddonomic Effect”. With additions to the celebration and more and more enthusiasm over the ‘once in a lifetime event’ and the COVID-19 introducing a new normal to all our lives there is bound to be a bump in the usual growth of the wedding industry but the cycle shall keep running while the wheels continue to accelerate the economy at a micro level to create a macro impact.