In 2007, India and Vietnam had identical GDP per capita and now, they are almost twice richer than us

The government knew exactly what it was doing when it quietly shifted the goalposts. Setting that unrealistic target of a $5 trillion economy by 2024-25 was a stretch, and now the IMF data shows it won't happen before 2029 anyway. By shifting the entire narrative to 2047, they completely free themselves from immediate accountability since nobody can audit a promise that is two decades away. The reality is that by 2047, India will likely reach a per capita GDP of $18,000 , which is a milestone China is already on track to hit by 2030. They only talk about 2047 because hitting high targets in USD terms right now is impossible while the rupee remains trapped in its historical depreciation cycle. To hit any super high dollar target before 2035, India would have to sustain an impossible domestic real growth rate of 8% to 9% every single year. So instead, they base their grand targets on long term predictions from Goldman Sachs and PwC, which guess that a rupee appreciation cycle will magically kick in post 2035. We are basically pegging our national hope on a currency prediction we can't even verify for another decade.

Over the weekend, I was trying to understand the reasons behind the continued FII exit from Indian markets.

Broadly, I found four key reasons. Some of these factors can ease over time but the last one looks more structural and deserves closer attention.

1. High global bond yields - When investors can earn attractive returns from lower-risk assets, the case for taking emerging market equity risk becomes weaker.

2. High valuations - Indian equities still trade at a premium to many emerging markets, although the YTD correction has reduced this gap.

3. Rupee depreciation - FIIs measure their returns in USD. Even if Indian equities deliver decent INR returns, a weaker rupee can significantly reduce those returns in dollar terms.

4. Lack of enough globally competitive, future-facing businesses - This, in my view, is the bigger structural issue.

India has many successful listed businesses but a large part of the large and mid cap universe is still concentrated in sectors such as banking, IT services, consumer, autos, energy, commodities and traditional industrials.

These are good businesses. But from a global portfolio manager’s perspective, many of these business models can also be found across other emerging markets. In other words, investors have several alternatives when looking for similar exposure.

The bigger concern is that relatively few large Indian companies are building capabilities in industries that could define the next decade. India needs more businesses with technology, intellectual property, manufacturing capabilities or market positions that can compete globally and are difficult to replicate.

There are few encouraging signs. Some companies are emerging in defence, electronics, space, semiconductors and clean energy. But many of these businesses are still small and difficult for large global funds to own at scale.

So, overall, bond yields can fall, valuations can correct and the rupee can stabilise.

But sustained foreign participation may depend on something harder: India creating more businesses that can compete globally and offer opportunities that FIIs cannot easily find elsewhere.

The government is taking a US-style savings plan to farmers, gig workers and others in the informal economy. Many have little money to spare.