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India's Digital Transformation Powered By 5G – Seeking Alpha

India 5G industrial illustration, huge cellular network mast or tower on hi-tech background with the flag - 3D Illustration

DancingMan/iStock via Getty Images

DancingMan/iStock via Getty Images
The 5G rollout in India may provide infrastructure that could accelerate the digital transition of India’s economy. The shift is creating investment opportunities worth consideration.
India’s economy has been surprisingly resilient to external shocks posed by Russia’s war on Ukraine and interest rate tightening by the U.S. Federal Reserve, despite higher energy prices and a stronger U.S. dollar. In fact, the country could emerge as Asia’s strongest economy in 2022-20231 as it is propelled forward by economic policy reforms, a young workforce, and infrastructure investments by the government and private sector. India’s central bank remains positive on the country’s growth outlook and expects inflation to cool as well as a lift-off in the economy from both domestic demand and foreign investment, as global investors diversify away from China.2
The private sector investments, along with the government’s digital infrastructure spending,3 are setting the stage for India to become a mobile-first economy. The government is investing in e-governance platforms and state-of-the-art telecom infrastructure.4 The recent 5G spectrum auction in India exemplified the public-private partnership that is exacting the change. Jio Platforms, the internet arm of Reliance Industries (*7.64%) and Bharti Airtel (*7.56%) were the top two buyers in the 5G spectrum auction. Jio bid $11.5 billion while Bharti Airtel bid $6.5 billion for the 5G spectrum.4 Mukesh Ambani, the chairman of Reliance Industries, announced a $25 billion commitment to launch 5G in India. Ambani announced Jio’s launch of 5G services in major cities by the end of October 2022 and Jio aims to cover every district in the country by December 2023.5 Jio’s ambition is to become the world’s largest and most advanced 5G network, ahead of China and the United States.
A 5G rollout could be a technological and social game changer in India. Two-thirds of India’s population live in rural areas beyond the reach of cable-based broadband and 80% of India’s internet users primarily access the web through their mobile phones often at creeping speeds.6 The 5G infrastructure build-out may have effects throughout both core and newly digitizing sectors of the Indian economy. The startup ecosystem is rich in unicorns focused on fintech, health care, education technology, logistics, e-commerce, online marketplaces, gaming, and SaaS (software as a service) based tools, which all stand to benefit from the 5G rollout.7
The application of 5G across India may unlock immense value. There are a number of 5G use cases for enterprises, small businesses, and consumers. For instance, private 5G networks could enable larger I.T. services companies to do more in the field of robotics, automation, and IoT (internet of things) while maintaining control over data and network security.8 These 5G networks could also help improve the digital infrastructure needed for real-time payments using mobile apps, making it easy to transact in a 3.1 trillion dollar economy.9 Small businesses or street vendors could take payments more securely via digital apps and C2C (consumer-to-consumer) transactions. The establishment of financial services in underpenetrated segments of the economy could likely accelerate growth in digital payments in India. India’s digital payment markets alone are expected to triple to $10 trillion by 2026.10
The 5G rollout could provide the infrastructure support needed to realize the country’s vision of tracking activity across its broad economy and bringing more people into the tax net. The reserve bank of India is in the works of launching a digital rupee in the fiscal year 2022-23. The government hopes that the digital rupee will provide a significant boost to the digital economy while also making currency management cheaper and more efficient for the central bank.11
Digitization Impacts Companies Across All Sectors of the Economy
Digitization Impacts Companies Across All Sectors of the Economy
We believe 5G infrastructure is imperative to the digitization of value chains and a cornerstone in establishing consumer and merchant confidence in e-commerce and digital payments. The 5G rollout across India could provide further support to the country’s healthy startup ecosystem and digital apps providing consumer-focused solutions. The emergence of embedded payments via 5G, IoT, and the launch of India’s sovereign digital rupee could accelerate digital adoption across all sectors of India’s economy. VanEck Digital India ETF (DGIN) and the VanEck Emerging Markets Fund (GBFAX) offer access to the structural digital growth story of India and could be appealing investment opportunities for investors looking to seek technology or growth exposure in emerging markets.
DISCLOSURES
*Portfolio weights as of 09/06/2022.
1 India could emerge as Asia’s strongest economy in 2022-23, says Morgan Stanley
2 https://www.bloomberg.com/news/articles/2022-08-21/india-rate-panel-member-sees-continued-growth-despite-hikes-pti?sref=wyMYZNQq
3 https://www.vaneck.com/us/en/blogs/emerging-markets-equity/a-digital-revolution-made-in-india/
4 India Moves Boldly Into a 5G Wireless Future
5 Ambani Commits $25 Bn To Launch 5G In India
6 Source: Kantar report “Internet Adoption in India”.
7 Source: Orios Venture Partners – India Tech Unicorn Report 2021.
8 What is private 5G network and its application in India?
9 India is now a $3.1 trillion economy – Times of India
10 EY Report: $1Tn Fintech Opportunity.
11 What is Digital Rupee, how it works
This is not an offer to buy or sell, or a recommendation to buy or sell any of the securities/financial instruments mentioned herein. The information presented does not involve the rendering of personalized investment, financial, legal, or tax advice. Certain statements contained herein may constitute projections, forecasts, and other forward-looking statements, which do not reflect actual results, are valid as of the date of this communication, and subject to change without notice. Information provided by third-party sources are believed to be reliable and have not been independently verified for accuracy or completeness and cannot be guaranteed. VanEck does not guarantee the accuracy of third-party data. The information herein represents the opinion of the author(s), but not necessarily those of VanEck.
An investment in the VanEck Digital India ETF may be subject to risks which include, among others, special risk considerations of investing in Indian issuers, equity securities, small- and medium-capitalization companies, communication services, and information technology sectors, emerging market issuers, foreign securities, foreign currency, cash transactions, market, operational, index tracking, authorized participant concentration, new fund, absence of prior active market, trading issues, passive management, fund shares trading, premium/discount and liquidity of fund shares, non-diversified and concentration risks.
You can lose money by investing in the VanEck Emerging Markets Fund. Any investment in the Fund should be part of an overall investment program, not a complete program. The Fund is subject to the risks associated with its investments in Chinese issuers, direct investments, emerging market securities which tend to be more volatile and less liquid than securities traded in developed countries, foreign currency transactions, foreign securities, other investment companies, Stock Connect, management, market, operational, sectors and small- and medium-capitalization companies risks. The Fund’s investments in foreign securities involve risks related to adverse political and economic developments unique to a country or a region, currency fluctuations or controls, and the possibility of arbitrary action by foreign governments, or political, economic, or social instability.
Investing involves substantial risk and high volatility, including possible loss of principal. An investor should consider the investment objective, risks, charges, and expenses of a Fund carefully before investing. To obtain a prospectus and summary prospectus, which contain this and other information, call 800.826.2333 or visit vaneck.com. Please read the prospectus and summary prospectus carefully before investing.
© Van Eck Securities Corporation, Distributor, a wholly owned subsidiary of Van Eck Associates Corporation.
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Editor’s Note: The summary bullets for this article were chosen by Seeking Alpha editors.
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