The rise of Tier 2 and Tier 3 India - Kevin Carter, EMQQ

Kevin Carter is the founder of EMQQ Global and a leading voice in emerging markets investing. In his first appearance, he broke down the investment case for digital consumption in emerging markets. In this follow-up episode, Kevin returns fresh from a month-long trip to India, where he went beyond the usual business hubs to explore tier 2 and tier 3 cities, the infrastructure transformation, and why India might be the most compelling EM story of the next two decades.

In this episode we cover:

• (00:01:30) What Kevin saw firsthand in Uttar Pradesh and Ahmedabad that made him more bullish on India’s tier 2 and 3 cities
• (00:06:52) The rise of entrepreneurship in smaller cities and why the next unicorns may come from beyond IITs and IIMs
• (00:12:41) How India Stack digitized over a billion lives and added trillions in hidden infrastructure value
• (00:24:42) The explosion of quick commerce in India and why it may disrupt not only kirana stores but also Flipkart and Amazon
• (00:36:46) Why Mumbai’s infrastructure boom rivals what Kevin saw in China 20 years ago
• (00:41:59) Why you need to visit India to understand its transformation and how old stereotypes are holding back global perception

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Transcript

00:00:00 KEVIN CARTER
I have traveled quite extensively in emerging markets starting in China 20 years ago when they were in the middle of their infrastructure build and I don't remember seeing anything like it.

00:00:10 NICK LALL
Hello and welcome to the INSEAD Emerging Markets Podcast, where we interview business leaders and emerging market experts on business innovations, market opportunities, and macro -level trends in emerging and frontier market countries. Join us for the next hour to dive deep into the world of emerging markets as we speak with top performers who are successfully investing, working, and living in these markets themselves. Welcome to the NCAA Emerging Markets Podcast. I'm your host, Nick Law, and we have a special guest back today, Kevin Carter. Really enjoyed the last podcast with him, and he is now back kind of shortly after our last podcast. He had a very interesting trip to India, has a lot of insights on it. and really excited to hear about what he learned in what I view as one of, if not the most exciting emerging market in the world right now. Spent a lot of time traveling throughout the country beyond just the major cities. And so I'd love to hear a little bit more about what you learned on your trip, what makes you more excited about India than even our last conversation. And maybe we could just start out with, I know you spent some time in second and third tier cities, not even just Mumbai or Delhi you went to. places in Uttar Pradesh and other more remote parts of India. And so we'd love to hear about how that experience was and why that makes you more bullish on India as a market to invest in.

00:01:30 KEVIN CARTER
Sure. Well, thanks for having me back. And so, yeah, my wife and I went to India for most of November and we were fortunate that we were invited by a friend of mine to stay with him and his family for Diwali in a small city called Chamle, which is about a little over 100 ,000 people. So it's, depending on how you measure it, it's barely a tier three city. And it's in UP,

00:02:01 KEVIN CARTER
in UP, as you said, and it's a couple hours, you know, north, it's in the northwest sort of corner of UP. And it was an awesome experience in so many ways. We stayed with my friend's sisters at her house, his home and family home was, you know, a block away. And in fact, the whole block was lined with

00:02:21 KEVIN CARTER
relatives and so it was really an amazing experience and you know a lot of differences in every you know part of life there versus here it was just great on very many levels and we got to see that and we also stayed with the family in Ahmedabad which is you know tier two city depending again on how you measure it but what was pretty clear was that Not just from our stay within those two towns, but with other, you know, meetings we had that tier two and tier three India are here and they are becoming a bigger and bigger part of the India growth story. And we saw it in many dimensions. We certainly saw that there's a lot of wealth in these places. You know, there's tier one consumers in tier four cities and so forth. And we saw that they wanted the things that are part of that consumer growth story, because ultimately, the reason you invest in emerging markets is because it's the six and a half billion people that are emerging and they want all the stuff that we have, more food, better food, clothing, appliances. They want to go on vacations, go to a movie and get a car and have their kids go to Harvard. And so it was pretty clear that this is happening. And we saw it, the family we were with. planning their next international vacation and looking to get their oldest child into college in the United States. So all those aspirational things are happening. And so we got to see it on the ground. And then also, you know, it was when I got back when one of the first things I saw in the news was a quote from the person that runs the India market for Meta. And their two takeaways were that the e -commerce was exploding in second and third tier cities. Their second takeaway was quick commerce is exploding, which we'll talk about maybe in a minute. But so the growth numbers, the tier two e -commerce growth numbers are over 50 % growth. The tier three e -commerce growth is over 60%. So these are huge growth rates. And there's a lot of people in second and third tier India, well over a billion. And so the e -commerce story that we invest in with INQQ and our other strategies, that's happening. And a lot of the naysayers, again, have always said, well, there's a lot of rich people in India, but everyone else doesn't have any money. And so all of these things, they only have a limited market potential. But I think that that's... seemingly turning out to not be the case. And this is important because you need the rest of India to grow and experience that growth and consumption. And so the internet story is happening. We heard this, we met with one of our recent Indian travel IPO, Ixigo, which is now a holding, and they're really focused on the second and third tier consumer. that is on the bus today and on the train tomorrow and then the air -conditioned train next year. And then eventually they'll get on an airplane for the first time. And here again, the growth numbers and the percentage, I think what I heard was that more than half of the international travel booking for Diwali had come from tier two and tier three cities. So seeing confirmation of that pattern. was important and then the other thing that was interesting in terms of the tier two and tier three cities and their emergence was the entrepreneurial story because you know if you look at the internet companies that are public the ones that we own like nika or make my trip or zamato you know these are all founders that went to the best colleges of the world they went to the iits the iims And that's good. And it's good that India has this incredible talent pool and these great universities. But there's another 1 .4 billion people that didn't go to those schools. And we know that the cultural shift towards entrepreneurism has exploded in the last seven years, that there was less than 500 registered startups in 2016, and now there's 120 ,240x growth.

00:06:52 KEVIN CARTER
But what we heard was that now the best entrepreneurs and the best opportunities are not necessarily the IIT and IIM graduates. And that the second and third tier cities and second and third tier schools are yielding the next wave of entrepreneurs. And we were able to spend time with a couple of our friends that have a venture fund called 2AMVC. Brendan Rodgers and Herschel Mehta. And they had a pitch event where 10 entrepreneurs came in and had three minutes each to pitch their ideas. And, you know, they ordered a bunch of pizzas. And so we got to do that one evening, which was super fun and sort of reinforcing our thoughts on this just incredible entrepreneurial thing that's happening in India.

00:07:39 KEVIN CARTER
that's happening in India. And then in Mumbai, we met with Anupam Mittal. founder of Shadi, the marriage website that is kind of the OG of the new age tech in India. The company was started in 1998, obviously not on an app -based mode, but on an old school internet mode. And it's not public yet, but it might become so. But Anupam is one of the originals of this story in India, this new age tech thing, and he's invested in hundreds of companies. also one of the sharks on Indian Shark Tank, which again, itself speaks a lot about the entrepreneurial thing that's happening in India. But he, again, reinforced and told us about his experience and his expectations for what he would find from his investments before he started Shark Tank. And then his experience in the first few years and the success, most importantly, the rate of success, the batting average, if you will. he thought was a lot higher. It had turned out a lot higher than he'd thought. And again, stressed the importance of spreading this entrepreneurial spirit in India. And I think also that it's pretty clear that Shark Tank India itself has helped to inspire this. And this is all very important because entrepreneurs create jobs. I mean, this is important because India needs a lot of jobs and they'll get jobs from the China plus one trend. But the more entrepreneurs, the more job creation they're going to have. And so I think all of this is also good news for the India story that the rise of tier in two, three, everything in India.

00:09:27 NICK LALL
Yeah, I mean, that is great to hear because I think that's something that you often heard was one of the limiting factors of investing in India is that sure, there is a certain segment of the population where these entrepreneurial success stories might be successful, but there's still a huge part of the country where it wouldn't be in. I guess my question would be, what would you attribute this growth in entrepreneurial activity to in these tier two and tier three cities? Is it rising consumer demand, consumer spending power? Is there infrastructure that's allowing it now that wasn't there in the past? Are there any major factors that you think have been the major reasons that this is happening?

00:10:02 KEVIN CARTER
Well, I think it's all of the things you mentioned and other things. I mean, I think it's the availability of... pocket -sized supercomputers for as little as $12. And this is what, you know, the whole foundation of my business and investment folks has been for the last 10 years plus is you've got all these consumers and they've never had a computer before and they're getting their first computer today. And millions a month in India are getting their first ever computer and they're getting their first ever internet connection once they have that computer. So at its simplest. This is about bringing the computer and the internet, the information age, to all of these new consumers in India. And that's been going on for a while, but it's still going. And a lot of it's still pretty new. And so that's the first thing. And then the physical infrastructure is certainly important. And what Modi has done in the first 10 years of his service was essentially double. all of the physical infrastructure. And it's not even close to done. There's a $1 .2 trillion Gandhi Shakti master plan for the infrastructure. And another thing we saw was a lot of these projects are coming online now. They have a long way to go and a lot more money to spend. But in pretty much every city we were in that we'd been in before, There were major projects that weren't open the year before that had opened. So getting from South Mumbai to Worley or BKC used to take a lot longer than it does now because of new infrastructure that's come online just this last calendar year. The new tunnels in Delhi that gets you under a lot of the surface traffic. The new airport in Bangalore. So all of that's important. The other thing beyond just the smartphone is the India stack. I mean, this is India's secret weapon because, you know, India is a lot like China was 15 or 20 years ago, except when China was at this stage, nobody on the planet had a smartphone. And so it's the advance of the pocket -sized supercomputer in the last 15 years from it. It doesn't exist to now everyone wants one and will have one soon. And again, the prices have come down. Android -based smartphones are getting better and cheaper every year. But then you take this digitized, connected, new population of consumers, and you build this operating system,

00:12:41 KEVIN CARTER
population of consumers, and you build this operating system, this India stack, the digital public infrastructure, to run basically the whole country on. That is a true game changer. If the stack didn't exist, it wouldn't be happening. And obviously, if the smartphone didn't exist, we wouldn't be having this conversation at all. So India's come a long, long way in digitization in the last 10 years for sure.

00:13:15 NICK LALL
Definitely. And speaking of the India stack, you mentioned that you had a fun experience going to the post office there and seeing it in action. I was wondering if you could talk a little bit about that just to give people a picture of how the stack actually works in action. Sure.

00:13:28 KEVIN CARTER
Let me just first explain what the stack is quickly. So the India stack is India's proprietary, homemade digital public infrastructure. Now, a lot of people don't know what digital public infrastructure is. Just as it sounds, these are digital programs that are free. They're open for the public to use. And they are essentially the infrastructure, the pipes, if you will, for the information age. And the best examples of digital public infrastructure, are the internet itself. It's digital. It's free. Anyone can use the internet. And we don't see it like the cables and telephone lines on the poles, but it's the infrastructure. And so GPS is another example of digital public infrastructure. India obviously has the internet and GPS, but it also has several of its own pieces. And the reason that they call it the stack is if you make a picture of it, it looks like a stack of pancakes. The foundation of the stack is called ADAR, as you know, and that means foundation. So the foundation is called the foundation. And it's the digital identification system that India launched in 2010. So as part of their effort to modernize their economy, one of the most important things was they needed to make sure everybody had an identification card because a very low percentage of Indians had any form of identification. And so in 2010, they wanted to launch a program to give everyone a physical ID card with their picture and their information and also their own unique 12 -digit identification number, like a social security number in the United States. And a big project for sure.

00:15:12 KEVIN CARTER
big project for sure. And they asked one of the founders of Infosys, Nendanilkani, who's also the chairman of the board of Infosys, they asked him to be in charge of this program. And he agreed to do it, but insisted that they use a lot of technology and that when people registered, not only would they be issued a physical card, but they would also have their fingers and eyes scanned when they registered so that biometric information could identify these people pretty much instantaneously and that, you know, essentially no or very, very low cost because, you know, it used to take weeks to open bank accounts and things because, you know, you had to. try to prove who people were. Now, if you had this biometric information, you could cut a lot of cost and inefficiency out of the system. And so they launched that in 2010, and now it covers 95 % of the population. And so that's the foundation of the stack, the digital identification system. But it's not just the fact that they have it, it's how they've deployed it. Because what they've used this to do... The first kind of aha moment was when they used this to sign up bank accounts. So they launched a program in 2014 and they said, all right, if you're in the database, now you can go into a bank and you don't even need any paperwork. You can open a bank account, a digital bank account. And that has yielded almost 800 million new digital bank accounts. So you've taken a population that was not in the formal economy. What didn't have a bank account, didn't have a credit card or debit card, and their entire lives were paper currency. And now they've digitized, you know, at population scale, the financial system using the stack, using the Audar database. When GEO launched the first 4G network in 2016, Reliance GEO, they used the stack to take the signup time from hours or days. to five minutes. So you walked in the Geo store and you put your thumb down and look in a camera and you walk out a few minutes later with a brand new phone. So the stack is incredibly valuable in this whole thing. The next layer on top of that is the payments layer, which has taken off and we can talk more about it if you want. But this whole thing is quite genius. And the man himself that has overseen this is just an amazing human. I mean, this guy is a... The national treasure of India is and the world is a better place for him being here because this has really helped India a lot in so many ways. India could not be where it is today without it. And he's not done. He's working to help other countries now advance themselves. So if you want a copy of any of these pieces of digital infrastructure, he's happy to help you. get it to better the lives of your own citizens. And so I had my meeting with Nenon on the calendar and several days before I got there, he sent me another email and asked if I wanted to see the stack in action, which of course I said, yes. And so I met some of his team at the Center for Digital Public Infrastructure. I met them at the post office that was a few blocks from his office. when they registered everyone to be in this database, the post offices were one of the main places you could go to get your fingers scanned and your eyes. And so I got to actually see the desk, the hardware, where they've done all of these signups. Now, because everyone's in the database, it's got a little dust on it. They don't use it that many times a week now, but I got to see the actual physical apparatus that is used. And then a lot of the... Things that are done using the stack actually take place in the post office.

00:19:11 KEVIN CARTER
lot of the... Things that are done using the stack actually take place in the post office. And so we went into a side room where people were coming in to do different day -to -day types of activities. There was a retired soldier who had come in to do his annual proof of life. So if you want to keep getting your pension, you need to verify that you are still alive. That's the kind of thing where there's a lot of fraud historically. And certainly in the United States, we have people pass away and the family keeps getting the checks in the mail from the government, not knowing this. And so this one man came in to verify he was still around and they scanned his eye. There was another woman that wanted cash and came in to take some physical paper cash out of her postal account. So it was really amazing. It's also amazing how they actually did this and it actually pulled off one and a half billion people's finger and eye scans with only a few dozen people in the headquarters. I mean, they outsourced the whole thing basically in a also kind of genius, low cost way. So anyhow, I can't emphasize how important this India stack is. I urge investors to take the time to study it and see. all of the efficiencies and the value of this incredible digital public infrastructure. And this isn't something that is unique to emerging markets. It's unique to all markets. There is no country that has digital public infrastructure like India's. And so that also raised one of the sort of questions was, how much is this worth? Like, what's the value of the stack, right? How much is the India stack worth? Now there's no... precise or even close to precise way to measure that. But as you go and think about and look at all of the various places where value has been added, what's the value of taking 800 million people from not in the financial system to in the financial system? What's the value of taking a process that took one week and making it take two minutes? In almost every business I met with, you know, I met with a lot of our holdings, the new age tech companies, and they couldn't exist without the stacks. They're like, okay, what's the value of Zerona, the online brokerage firm, which is still private. It used to take a week to sign up a new account. Now it takes two minutes. So you think about all of the time savings and the efficiencies, the slippage in the government programs. where a huge percentage of the money that was supposed to get from A to B, somehow it ended up going to little a all the way to B, and some of it disappeared. So this is a hugely, hugely valuable thing. And I've engaged a more learned friend in these matters to try to put a value on it, but it's got to be at least a trillion dollars. India's stack, it's just genius and it's adding value across the board to the country. And I think that the quality of the growth is also very favorable because of the stack to formalize the Indian economy.

00:22:45 NICK LALL
Totally. And I think that goes back to the earlier question on what infrastructure is there that's made these tier two and tier three cities have the opportunity for entrepreneurial action. And I think that clearly is a piece of infrastructure that I'm sure must have been instrumental. I was wondering if you have any particular companies or use cases of the stack in businesses that are really useful to these tier two or tier three consumers or how it may be affecting life in those parts of the country.

00:23:14 KEVIN CARTER
Well, I mean, again, just being included in the formal financial system of not having to keep all your money in the paper. I think. everybody's life in India. It doesn't matter which year, tier one, tier two, tier three, and all the same benefits are accruing. One of the other pieces of the stack that's got huge value is the fast tag system. So cars, when they go from state to state, can, instead of paying cash at the toll booth, they can zap through. And then the e -way bill, I think is what it's called, the commercial version where the trucks and the cargo rather than pulling into a yard to have an inspector come out with a paper pad and go through the inventory and make a tax receipt. You just zap it and you go under the... So everyone's life is benefiting from the stack. There's no doubt about that. In terms of things that are happening right now, I mean, as I mentioned, the biggest takeaway... In terms of e -commerce, it's this quick commerce thing that's exploded in India. And the more I'm processing it, the more my eyes are getting bigger and bigger about how big and how disruptive this quick commerce explosion is in India.

00:24:37 NICK LALL
Yeah, I would love if you could talk a little bit more about quick commerce, what it is and why it is so disruptive.

00:24:42 KEVIN CARTER
Sure. So quick commerce, as the name implies, is quick commerce. It's quick e -commerce. It's essentially 10 minute delivery of anything. And now that, again, this depends on what it is and what country you're in. But in India, let's say it's 10 minute delivery. And all three of the, you know, this is a three horse race right now. And all of them, their headline number is 10 minutes. Let's say it's 10 minutes delivery, but it's just really fast delivery of pretty much anything you want. And I've actually, three years ago, I went to Bogota, Colombia on my Latin tour to see this company called Rappi, R -A -P -P -I, which is one of the largest unicorns in Latin America, which really, as far as I know, is maybe outside of China, the most successful of these quick commerce companies. heretofore. And the way the business works is you're going to put a dark store, a micro warehouse that might be a thousand, two thousand, three thousand square feet. And you're going to put one every mile or a mile and a half. It depends on the density and the layout of the city. But in India, let's say every mile, there's going to be a store. It's not open to the public, but it's the little stock room or miniature warehouse. And then you're going to have an army of low cost labor on two wheeled vehicles. And, you know, you'll go on the app and you'll put in your address and it'll tell you what's available. And, you know, you'll see all the basics, kind of the staples you'd find at a corner store. They'll have about 10 ,000 SKUs, though, in India. And their stores in India are about 3 ,000 square feet on average. And the driver, it'll take one minute and 40 seconds. When you push the button, that product will be in a bag ready for pickup in less than two minutes. And a person on a scooter, a driver, is going to grab it and get on his moped or motorcycle, and he's going to be in your face six minutes later. And he's going to hand you a bag with whatever it was that you wanted. And so, again, I saw this in Columbia. It was one of the most impactful things I'd ever seen because when you walked out on the sidewalk, it didn't really matter what time of day. All you had to do is stand there for a minute and you'd see 50 of these drivers go by. It was like a swarm everywhere you looked. And I remember the first day I was like, oh my gosh, I've never seen e -commerce in my face like this. And I got back up to my room. And I looked down the alley behind my hotel room and there was like six Rappi drivers there. Right. I mean, it was everywhere. And they have this sort of pinkish orange color for Rappi. They actually had a mustache was their logo, like Lyft's logo was originally. But so this is a big deal. So let me tell you how this is playing out and kind of how I got started. So one of our biggest holdings in India is a company called Zomato. which I tell people it's the DoorDash of India, right? Food delivery. And yes, that is their main business. They have more than 50 % of the market share for food delivery. But as I always like to tell people, you can call it the DoorDash of India, but that doesn't get you all the way there because in India, every industry has a green fields nature, like it's white space. When DoorDash arrived here in the United States, we had plenty of restaurants, maybe too many restaurants. Restaurant supply businesses were scaled up. You know, we have Cisco, S -Y -S -C -O, which drives the trucks around in the morning and unloads the tomato sauce. And so your local restaurant can feed you that night. So this is a very well -developed in the United States and the developed world. But in India, it's not. And so a year ago or 18 months ago, I would have said, look at this other business that Zomato has. They have this business called Hyper Pure, which is selling restaurant supplies. So that was their fastest growing business was not just picking up the food, but actually providing the supplies to the restaurant that's going to make the food. Well, that business is still growing fast and it's still a huge opportunity. But in the last year. pretty much every quarter when Zomato reported, they blew out the numbers with this Blinkit offering. So Blinkit is the brand of Zomato's quick commerce company, B -L -I -N -K -I -T. And it was originally founded as Grofers and was acquired a couple of years ago by Zomato at a seemingly pretty good price in hindsight. And this business is exploding. The growth rates that it is achieving right now, it's 100 % growth. And there's so many cities they haven't even gone to. It's in a very small number of cities. And so this is a unit growth story at this point. And the reason this is such a big deal is if you look and say, okay, where are the consumers spending their money today? 90 % of all the consumer spending happens in the mom and pop Karana stores. And this is part of their culture of India and in so many ways. But you have 13 million mom and pop stores, the Karana stores, and they might have 150, 200 items. And, you know, there's one or two or three every block, depending on what city you're in. And and that represents 90 percent of all consumer spending, which is about 550 billion dollars. When I got back from my trip in 2023, I thought, well, one of my takeaways was the Karana stores were going to get digitized. And that's true. They are getting digitized and have been digitized, especially on the payment side. But now I'm afraid they're not going to survive this quick commerce thing because they're changing consumer behavior very quickly. And the growth that they're experiencing, some of it has to be coming from someplace else. And, you know, so potato chips and soda, those kind of things. And it's been really fascinating to watch. And the founder of Blinket actually posts some really interesting things on LinkedIn about, like, what are the top selling items on New Year's Eve with a live tracker? And, you know, potato chips was number one. You know, and then as the night went on, it was, you know, get some gin and other things. So this is very disruptive. And the Karana stores are definitely under attack. And so are, I think, Flipkart and Amazon. Flipkart's the local leader in e -commerce, traditional e -commerce, which is also controlled by Walmart now. But I think they might also be creating... It's not clear that they're taking from either or both and or if they're just creating new market. So I think it's a combination, but it has a chance of being incredibly disruptive. It's happening very quickly. Now, the Karana stores... have other challenges as well. A lot of them have closed because the children don't want to work there. They also have opportunities to become franchise dark stores. So, you know, some of them will become savvy and figure out how they can become part of the new way of doing things. But the magnitude of this opportunity is immense. And there's now three players in this. You've got Blinkit, which has a little less than half the market. Again, is owned by Zomato. Then you have Swiggy, Swiggy Instamart. Swiggy is the second largest food delivery company. And it's now the second largest quick commerce company. It actually went public when I was in Bangalore. And then you have Zepto. And Zepto is the one that I find the most intriguing. It's not public yet. But it's the only pure play, if you will. And I featured the company because the two founders dropped out of Stanford to start Zepto. And so I've used it as an example of entrepreneurship. Not many kids from anywhere, you know, get themselves into Stanford and they decide, I don't want to leave. So that itself speaks a lot about the entrepreneurial spirit in India. But Zepto is now worth about $5 billion in their last round. And they've quickly caught up to and are kind of neck and neck with Swiggy for number two now. And what's also fascinating is now that the product mixes, they're, well, I'll give you some examples of other things that you can now do with these quick commerce companies. Now, one of them is Blinket has a new offering called Blinket Bistro, which Zepto launched a similar thing. If you want a latte or coffee or something you'd get at a bistro or Starbucks, basically, you can get all those things 15 or 10 minutes. You could buy gold coins during Diwali, 10 -minute delivery of gold coins. You can get an iPhone in 10 minutes. You can get ambulance in the last couple of weeks, Blinket announced. A private ambulance. Again, not in every market, but when you log in with your zip code, they'll tell you what's available. And so you want a private ambulance, which you might want, they'll get you an ambulance in 10 minutes. And so the ability to extend this concept into areas like that, it's just so much opportunity. Maybe I'm kind of a geek like this, but I'm so excited about this because this is capitalism and competition at a scale and in a disruptive way that doesn't happen very often.

00:35:03 NICK LALL
Definitely. Yeah. I mean, hearing that it may not be so good for the Krona stores is a little bit sad. And I can see why you're saying that this is almost as disruptive as AI for the labor market, perhaps in India. But at the same time. In a place, anywhere in the world, something like getting an ambulance in 10 minutes is pretty amazing. I think going back and some of the challenges people might have talked about in a place like India was the inefficiency with some of these sorts of services. And if there are private market solutions that allow that so quickly, I think that is really exciting. And as you were saying, it is one of the places in the world where capitalism is really making huge transformations really quickly. And that is very exciting.

00:35:43 KEVIN CARTER
Yeah. Yeah, and I understand AI is very disruptive, but it's not, you can't see it as much. It's not, you know, this is all the streets in your face. I don't know. It's a more visceral that you can see and feel this thing on the streets where the AI is, you know, it's totally. Yeah,

00:36:01 NICK LALL
Yeah, not so. It doesn't involve potato chips. Yeah. Yeah. I also see, and for those listening, they. won't be able to tell but in his background there is some city with a bunch of skyscrapers under construction and i'm assuming that might be somewhere in india which that's in mumbai and in fact at the base of the one on this side my favorite meal from our trip is the bombay cantina which is i think at the base he says at the base of that building right there so if you're looking for somewhere to eat nice find that building and walk around the base you'll find it check it out next time i'm there

00:36:03 KEVIN CARTER
doesn't involve potato chips.

00:36:17 KEVIN CARTER
in mumbai and in fact at the base of the one on this side my favorite meal from our trip is the bombay cantina which is i think at the base he says at the base of that building right there so if you're looking for somewhere to eat nice find that building and walk around the base you'll find it check it

00:36:33 NICK LALL
it out next time i'm there But yeah, I was also curious to hear more about that, the physical infrastructure, just seeing these cities evolve. Any insights there based on your most recent visit?

00:36:46 KEVIN CARTER
Well, I mean, again, one of the reasons that India took so long to get in gear was that the infrastructure was terrible. And this is why China pulled ahead. 20 years ago, China and India had basically the same GDP. But China, with a one -party system, was able to build the world's greatest infrastructure. And they have it now. And India couldn't even get the power to work. And, you know, Modi's basically doubled the infrastructure in his first 10 years. And they've got this $1 .2 trillion master plan. And it's a master plan. And this is important because what they've done is this plan, you know, India is shaped like a diamond, as you know. And so it's a sort of natural set of corridors on which to plan all of this. Where are the rails going to go? Where do we want manufacturing? And it's a big plan. It's going to take a long time to get done, but it's happening. And in Bombay in particular, maybe because I'm a very visual person, but I get affected by not just the fact that there's a lot of construction, but the physical scale of some of these projects is massive. And in Bombay, you have... The tunnels going underneath. You've got the elevated highways. You've got the roads out into the harbor to get around the traffic, which are massive projects and are not near done. You have all of the BKC construction. You have the high -speed train coming in from the north, from Ahmedabad. All right there. And the staging. areas where they get ready to build the roads on the water. It's just, it is hard. You can't put it into words or your pictures don't even capture it. And again, I have traveled quite extensively in emerging markets starting in China 20 years ago when they were in the middle of their infrastructure build. And I don't remember seeing anything like it. I mean, it's just massive. And as mentioned earlier, part of What's great is a lot of it's coming online now, right? And they need a lot more. A lot of cities desperately need relief from traffic. But the tunnels, you know, one of the reasons I stayed in Worley, which is called the middle of my zone of travel, because the last time I stayed at Nerman Point and the traffic to get up to BKC was horrendous. And so I stayed in Worley. My first meeting on the first day was at the National Stock Exchange, the NSC, which was north. And we got in the car, and all of a sudden, we were on this new road I hadn't been on as far as I remembered. And we were going south. I said, well, wait a minute, you're going the wrong direction. And I'm like, oh, no, maybe he's bringing me to the Bombay Stock Exchange. And all of a sudden, I was at Nerman Point. And I'm like, well, how did we get here so fast? Like, I stayed. And I'm like... So we went all the way the wrong way to the place I didn't stay at because I thought I was too far away. But we made it all the way back to where we started. And I got to my meeting essentially on time. So I benefited from the new infrastructure. And that's what I realized that this thing, I didn't understand how we made it there so fast. Like, how do we get here so fast? So we experienced the stuff that's opening up. You know, and hopefully the quality will be good. That's one of the problems with emerging market infrastructure is a lot of times, you know, it doesn't last as long as you would hope because corners were cut and so forth. And, you know, I know there's maybe been some issues in one of the tunnels in Delhi, but nonetheless, it's quite staggering what's going on. And it's going to take a long time, but it's good to see progress. And I can't even imagine, you know, what... Bombay is going to be like in 15 years when all of this is the metros are in and all the other pieces.

00:41:04 KEVIN CARTER
are in and all the other pieces.

00:41:08 NICK LALL
That was another problem with my hotel.

00:41:08 KEVIN CARTER
was another problem with my hotel. They were putting the underground metro on the block. I had this plan to stay there because I'm like, oh, this will save me a lot of time. And then that one block took like 30 minutes because they had it down to like one lane and they were building the subway right there.

00:41:26 NICK LALL
Sure, yeah. Yeah, well, that definitely puts it in perspective coming from someone who was there in China when their infrastructure build was just starting. And then that you're still amazed or surprised by this is definitely pretty telling. And definitely also agree with the point that you really need to be there in person to get a feel for how quickly these emerging markets are growing. For myself, that's what made me first excited about them when I went and visited these countries. And you can hear about all the exciting things happening on a podcast. But when you see it in front of you, I think you really get a feel for. what's going on in these places.

00:41:59 KEVIN CARTER
In fact, that was actually, you know, in my written report, which I'm not actually done with yet, but the conclusion was, you need to go see India. That's one of the, you know, in the investment world, one of the things, it just seems like, because a lot of people will tell you opinions about, you know, I think India this, or I think China that, but it's all abstract to most people. I mean, you know, a very small percentage of the investors I talk to in the United States of Europe have ever been to either India or China and so it's all abstract and they only know what they've you know picked up in the newspaper basically for lack of better description and you mentioned that this is one thing that I'm still trying to get my head around it completely but trying to figure out what does the average person think of India like when they think if they haven't been to India what do they think what do they visualize right and It's not a lot that they have. And I try to think about before I first went to India, what did I think? When I was going through school as a kid and high school and college and before I got any emerging markets, what did I think? And I think that there's two or three pictures, visuals that people have the river and the people in the river. And I've started to... poll people about this sort of informally like what do you think of when you think of india and so you know that the river scene right and pollution right and you know that element of it people are riding on top of trains and things like that people on the trains the boys playing in the junkyard you know if you watch slumdog millionaire which is probably one of the main sources of

00:43:33 KEVIN CARTER
pollution right and you know that element of it people

00:43:36 NICK LALL
are riding on top of trains and things like that people

00:43:38 KEVIN CARTER
that people on the trains the boys playing in the junkyard you know if you watch slumdog millionaire which is probably one of the main sources of information or impressions people have gotten. The movie is kind of old now, but it was a really good and well -received movie. But if you go back and watch it, you realize that it's no wonder that people like Amitabh Manson were not supportive of this movie. It doesn't make India look very good. Right? And it reinforces all of those stereotypes. And I've been thinking a lot about this. I think India needs a PR effort. They need to get new, different pictures in people's minds. And it sounds really simplistic, but I think it is, at least from my query so far, it is pretty true that people say, people on the trains, people on the river, it's dirty. All of those stereotypes that have been proliferated and as the only source material for most people, it's no wonder that that's kind of what they think. But I think, you know, I'm sure that will change, but it could probably be changed with some more strategic effort by different parts like myself.

00:45:08 NICK LALL
Yeah, I mean, a country with more than a billion people, there should be more knowledge about it, I would say. And I think. Maybe that will be something that comes soon as more media starts coming out of India. It's a large English -speaking population, so it should be pretty possible for that to happen.

00:45:22 KEVIN CARTER
There was actually a great headline of the paper. I think the headline was, in 2025, your next vacation will probably not be India. They went through and compared how many people visit India versus the other places. There's a lot of room for those numbers to go up. There's a lot to see. And a lot of awesome stuff.

00:45:47 NICK LALL
Absolutely. Yeah. Well, it was really great having you back, Kevin. Anything else you want to talk about or cover on this episode?

00:45:54 KEVIN CARTER
No, I think that's it. I think India is... If you're an emerging market investor,

00:46:00 KEVIN CARTER
you're an emerging market investor, India is as good as you're going to get on paper. And it's got a lot of other things that set it apart. And if you think about this... Once you emerge, it's a one -time thing, hopefully, right? You go from undeveloped to developed and along the way you are emerging and you reach that point. And maybe they'll reach that point by 2047 or definitely get in that direction. So if you're an emerging market investor, this isn't a once in a lifetime thing. This is a once thing. And it's still pretty early. And I think the next two decades are going to be very good for India.

00:46:41 NICK LALL
Definitely massive opportunity. Well, thanks again for joining. Always a huge pleasure and you're always welcome to come back. Thank you again, Kevin.

00:46:47 KEVIN CARTER
All right. Thanks, Nick.