As 2024 draws to a close, two significant developments shape India’s economic narrative: the decisive NDA victory in Maharashtra and clearer signals emerging from the US political transition. Maharashtra’s trillion-dollar economy vision exemplifies India’s growth ambitions, while early indications from the incoming US administration suggest a more measured approach to international trade than initially feared. This month’s commentary examines these developments against the backdrop of India’s resilient domestic economy, even as markets navigate through recent corrections.
The MSCI India Index was down 0.37% (in USD terms1) over the month of November, but outperformed regional peers thanks to improved economic conditions and corporate earnings. Still, foreign institutional investors (FII) remained net sellers of Indian equities in November, with net outflows of ~USD 2.6 billion (vs net outflows of USD 10.4 billion in October).2 Sector-wise, IT and Real Estate were the top performers, while Utilities and Materials were the laggards.
Goods and Services Tax (GST) collections remain strong, rising 8.5% y/y to INR 1.82 trillion (~USD 21.5 billion) in November, driven by festive demand, but grew at a slower rate versus 8.9% y/y in October.3 With the November collections, cumulative gross GST for the first eight months of FY25 is INR 14.6 trillion (~USD 173 billion), which is 9.3% higher than the corresponding period of FY24.4
Meanwhile, inflation remains a key point to watch, with the headline consumer price index (CPI) gaining pace to a 14-month high of 6.2% y/y in October (vs 5.5% in September), largely on account of rising food prices. While the last two headline CPI prints have exceeded the Reserve Bank of India’s (RBI) target of 4%, experts expect this to moderate in the coming months with an improved crop outlook. Core CPI (excluding food and fuel) showed a more moderate increase, edging upwards to 3.7% y/y in October (vs 3.6% y/y in September).
In a significant political development, India’s ruling National Democratic Alliance (NDA), led by Modi’s Bharatiya Janata Party (BJP), secured a decisive victory in the Maharashtra state elections this month. The alliance won 235 out of 288 seats in Maharashtra, marking their best performance since 1990. Meanwhile, the opposition INDIA alliance maintained its control in the smaller state of Jharkhand, highlighting the continuing regional variations in India’s political landscape.
Trump’s official return to office is still on the horizon, but early signs of his policy direction are already taking shape. His unconventional, maverick approach is set to usher in significant changes aimed at overhauling the federal government’s structure and operations. For example, the establishment of the Department of Government Efficiency (DOGE), to be led by Vivek Ramaswamy and Elon Musk, signals an aggressive push toward deregulation and federal downsizing. While these reforms may yield positive long-term economic benefits over a 3 to 5-year horizon, the rapid pace of change and the dismantling of established establishments could create near-term market volatility and institutional disruption.
But a key stabilizing factor emerges in Trump’s nomination of Scott Bessent to lead the US Treasury. Bessent brings a wealth of experience and a pragmatic approach to the table, which is reassuring amidst global economic apprehensions. As we had postulated in last month’s note, Bessent’s candid articulation of Trump’s tariff strategy also suggests that the proposed tariffs (60% on China and 10-20% on other nations) are a strategic negotiation tool, rather than definitive trade policy positions. In an interview with Fox News following the election, Bessent emphasized that these tariffs are designed to achieve broader foreign policy objectives, ranging from opening foreign markets to US exports to addressing illegal immigration and curbing fentanyl trafficking. This could actually be a positive, as many of these agenda items are a win for both sides.
Additionally, the implementation strategy for new trade policies appears to be more measured than what campaign rhetoric suggested. Rather than immediate high tariffs, Bessent points to a gradual phase-in over two to three years. This incremental approach would help minimize inflationary pressures and provide businesses with the necessary time to adapt and recalibrate their operations, supply chains, pricing strategies, etc.
With all this said, the moderated approach to trade policy could particularly benefit non-US markets as fears of an immediate trade war diminish. However, near-term policy risks still remain during this transition period. In response, emerging market economies may take more proactive measures to protect their interests, potentially driving regional growth irrespective of the broader US policy upheavals.
BJP’s NDA win in Maharashtra was a noteworthy one. As India’s economic powerhouse, Maharashtra contributes approximately 14% (~USD 500 billion) to the country’s GDP5 and houses the nation’s financial capital, Mumbai. This electoral outcome, which ends years of political uncertainty, sets the stage for implementing ambitious economic plans that could reshape India’s most industrialized state.
Maharashtra stands at the cusp of an economic transformation, aiming to become a trillion-dollar economy by the end of this decade – a scale that would place it among the world’s top 25 economies. This ambitious vision, backed by the state’s newly elected government, focuses on raising the manufacturing sector’s share to 21% of state GDP through strategic investments in 16 established industries where Maharashtra holds an edge, plus six sunrise sectors, including EVs and semiconductors. Supporting this industrial push are significant power reforms that will reduce industrial electricity costs by about 25% and a planned doubling of power generation capacity to 84GW over the next five years.6
The state’s development strategy leverages its existing strengths while building new ones. Mumbai, India’s financial capital, and Pune, a major IT hub, anchor the state’s robust services sector, which contributes 59% to the state economy. Major infrastructure projects are transforming urban mobility – including new metro lines, coastal roads, and a new airport – while power grid modernization and data center developments are creating the backbone for future growth. These initiatives, combined with targeted social welfare programs that promote inclusive development, aim to boost per capita GDP from the current USD 3,300 to USD 6,5007, positioning Maharashtra as a showcase of India’s economic potential.
We are seeing a dramatic change across India’s retail landscape through the rise of quick commerce – platforms that deliver groceries, essentials, and personal care items, often within 10-20 minutes, through a network of neighborhood dark stores. While traditional e-commerce giants like Amazon and Flipkart revolutionized Indian retail with their vast product selection and multi-day delivery model, a new generation of consumers is increasingly favoring the immediacy offered by players like Blinkit (owned by food delivery leader Zomato) and Zepto. As one of our Indian analysts recently put it, “If I can get it in 20 minutes, why would I buy it on another platform and wait 3-4 days even if it’s cheaper?”
This shift in consumer behavior has outpaced even optimistic expectations, with quick commerce effectively combining the best elements of India’s retail formats: the proximity of neighborhood ‘Kirana’ stores, the organized product range of modern retail chains, and the convenience of e-commerce.
Traditional e-commerce players and brick-and-mortar chains are scrambling to adapt. For instance, beauty retailer Nykaa is now pushing to offer same-day delivery in major cities. Meanwhile, quick commerce platforms are rapidly expanding their dark store networks while attempting to optimize unit economics through higher-margin categories like beauty and personal care products.
The disruption also extends to the Quick Service Restaurant (QSR) sector, where established players like Domino’s are facing the heat. Domino’s, whose core competitive edge was its robust online delivery model, now finds its core differentiator eroded by food delivery platforms that offer consumers vastly expanded choice and comparable delivery times. This dynamic is particularly evident in India’s top 10 cities, where both QSRs and food aggregators concentrate their operations. This overlap has led to weakening demand and deteriorating store-level economics for QSR operators.
While competition is fierce, we are closely monitoring the quick commerce space to identify the players that are able to successfully capture and retain users, gain significant scale, and chart a path toward profitability.
Recent market dynamics in India have validated our selective approach, with a notable correction particularly pronounced in the small and mid-cap segments. We have been worried about the rapid growth in unsecured retail credit over the past year, and thankfully, the Reserve Bank of India stepped in to curtail lending growth before it became a bigger problem. We’ve also been careful to avoid sectors where increasing competitive intensity could hurt profits.
Consequently, we stayed clear of momentum-driven mid and small-cap companies with weak business models, and since June, we have been increasing exposure to relatively resilient sectors like IT, Pharmaceuticals, and Hospitals while booking profits in domestic cyclicals like industrials, real estate, etc. This strategy has served us well over the past few months, providing valuable downside protection during recent market turbulence.
Our industrials analyst spent some time in India this month, where he met with over a dozen companies and toured manufacturing facilities in Mumbai and Bangalore. Here are some of his valuable insights into India’s industrial and manufacturing landscape.
Industrial momentum gaining traction: India’s industrial sector is displaying robust activity levels, particularly in defense spending where private sector participation continues to increase. Infrastructure development was evident across multiple cities, with significant projects underway, including the Navi Mumbai Airport construction, the Mumbai-Hyderabad bullet train project, and numerous highway developments in Bangalore. The consistent observation of full flights across domestic routes highlights strong travel demand and underscores the pressing need for expanded aerospace capacity.
Manufacturing goes global: The post-COVID era has marked a notable shift in India’s manufacturing presence on the global stage. Site visits to generator, turbine, and aerospace parts manufacturers in Bangalore revealed sophisticated operations capitalizing on lower operational costs, accessible labor pools, and a relatively flexible regulatory environment. Companies like TD Power Systems, operating three shifts daily to meet export demand, exemplify this trend. The manufacturer has secured a 90% domestic market share while successfully expanding its global customer base, particularly benefiting from the strong US power cycle in gas and renewables.
Supply chain resilience trumps efficiency: While construction speed and labor efficiency continue to lag behind Chinese standards, Indian manufacturers are successfully competing through reliable quality standards and supply chain resilience. Site visits revealed effective worker training programs and well-developed industrial ecosystems, particularly in Bangalore. This was evident at facilities like ABB India, where sophisticated customer requirements are being met with high standards, and Triveni Turbines, which has established a presence in over 80 countries. Though efficiency metrics may not match Chinese benchmarks yet, the combination of quality output and supply chain reliability appears sufficient to drive continued growth in global market share.
These observations suggest a particularly strong positioning for industrial multinational corporations with pricing power and stable competitive landscapes. Additionally, export-oriented industrial companies stand well-positioned to capitalize on global supply chain diversification trends, while maintaining their cost advantages and building on growing track records of reliable execution.
For sophisticated investors only. For informational purposes only. The information presented in the material is not, and may not be relied on in any manner as legal, tax, investment, accounting or other advice or as an offer to sell or a solicitation of an offer to buy an interest in any investment product or any other entity sponsored or managed by Shikhara Investment Management. This material doesn’t constitute and should not be considered as any form of financial opinion or recommendation.
This material is prepared by Shikhara Investment Management LP (“Shikhara”). This material does not constitute an offer to sell or the solicitation of an offer to buy in any state of the United States or other U.S. or non-U.S. jurisdiction to any person to whom it is unlawful to make such offer or solicitation in such state or jurisdiction.
Investment involves risk. Past performance is not indicative of future performance. It cannot be guaranteed that the performance of the investment product will generate a return and there may be circumstances where no return is generated. Investors could lose all or a substantial portion of any investment made. Before making any investment decision, investors should read the Prospectus for details and the risk factors. Investors should ensure they fully understand the risks associated with the investment product and should also consider their own investment objective and risk tolerance level. Investors are advised to seek independent professional advice before making any investment.
Shikhara’s investment products are suitable only for sophisticated investors and require the financial ability and willingness to accept the high risks and lack of liquidity inherent in Shikhara’s investment products. Prospective investors must be prepared to bear such risks for an indefinite period of time. No assurance can be given that the investment objectives of any given investment product will be achieved or that investors will receive a return of their investment.
Certain of the information contained in this material are statements of future expectations and other forward-looking statements. Views, opinions and estimates may change without notice and are based on a number of assumptions which may or may not eventuate or prove to be accurate. Actual results, performance or events may differ materially from those in such statements.
Certain information contained in this material is compiled from third-party sources. Whereas Shikhara has, to the best of its endeavor, ensured that such, information is accurate, complete and up-to-date, and has taken care in accurately reproducing the information, Shikhara takes no responsibility for the accidental publication of incorrect information, nor for investment decisions taken based on this material. Neither Shikhara nor any of its affiliates makes any representation or warranty, express or implied, as to the accuracy or completeness of the information contained herein, and nothing contained herein should be relied upon as a promise or representation as to past or future performance of any investment product or any other entity.
The contents of this material are prepared and maintained by Shikhara and has not been reviewed by the Securities and Exchange Commission of the United States.
This website is published exclusively for the purpose of providing general information about the management services carried out by Shikhara Investment Management LP, Shikhara Capital (Hong Kong) Private Limited and its affiliates (collectively “Shikhara Investment Management” or “Shikhara”). The information presented on the website is not, and may not be relied on in any manner as legal, tax, investment, accounting, or other advice or as an offer to sell or a solicitation of an offer to buy an interest in any investment product or any other entity sponsored or managed by Shikhara Investment Management. This website doesn’t constitute and should not be considered as any form of financial opinion or recommendation.
Shikhara Investment Management LP is currently an Exempt Reporting Adviser that is exempt from registration as an investment adviser with the U.S. Securities and Exchange Commission and Shikhara Capital (Hong Kong) Private Limited has been approved by the Hong Kong Securities and Futures Commission. This website does not constitute an offer to sell or the solicitation of an offer to buy in any state of the United States or other U.S. or non-U.S. jurisdiction to any person to whom it is unlawful to make such offer or solicitation in such state or jurisdiction.
Investment involves risk. Past performance is not indicative of future performance. It cannot be guaranteed that the performance of the investment product will generate a return and there may be circumstances where no return is generated. Investors could lose all or a substantial portion of any investment made. Before making any investment decision, investors should read the Prospectus for details and the risk factors. Investors should ensure they fully understand the risks associated with the investment product and should also consider their own investment objective and risk tolerance level. Investors are advised to seek independent professional advice before making any investment.
Shikhara’s investment products are suitable only for sophisticated investors and require the financial ability and willingness to accept the high risks and lack of liquidity inherent in Shikhara’s investment products. Prospective investors must be prepared to bear such risks for an indefinite period of time. No assurance can be given that the investment objectives of any given investment product will be achieved or that investors will receive a return of their investment.
Certain of the information contained in this website are statements of future expectations and other forward-looking statements. Views, opinions, and estimates may change without notice and are based on a number of assumptions which may or may not eventuate or prove to be accurate. Actual results, performance, or events may differ materially from those in such statements.
Certain information contained in this website is compiled from third-party sources. Whereas Shikhara Investment Management has, to the best of its endeavor, ensured that such information is accurate, complete, and up-to-date, and has taken care in accurately reproducing the information, Shikhara Investment Management takes no responsibility for the accidental publication of incorrect information, nor for investment decisions taken based on this website. Neither Shikhara Investment Management nor any of its affiliates makes any representation or warranty, express or implied, as to the accuracy or completeness of the information contained herein, and nothing contained herein should be relied upon as a promise or representation as to past or future performance of any investment product or any other entity.
The contents of this website are prepared and maintained by Shikhara Investment Management and has not been reviewed by the Securities and Exchange Commission of the United States or the Securities and Futures Commission of Hong Kong.
The Shikhara logo and name are trademarks of Shikhara Investment Management LP, registered in Hong Kong, the People’s Republic of China (PRC), Australia, the United Kingdom and the European Union and pending registration in the United States.