I have a problem with the way Indian influencers are doing things. In the last three years, every influencer has milked the concept of ancient India. I agree. India had great moments. But I don't want to stay stuck in the past. I don't want you also to stay stuck in the past. You must celebrate the past but focus on the present and the future. India's tiered consumer market is complex and diverse, with different segments having distinct needs and preferences. Businesses must carefully analyze this market and tailor their strategies to effectively tap into each segment's potential. By doing so, they can gain a competitive edge in India's rapidly evolving consumer landscape.

Today I'm going to share with you a shocking report called The Indus Valley report. It is written by a venture capital firm. I will show you through data and a story, how India has grown up. Did you know that in 2021 UPI merchant payments accounted for 43% of point-of-sale payments in India? But here is the contradiction. Despite us having amazing technology like UPI, the method of sales was still peer-to-peer. It's still the same old method of sales that we've used for many years and it seems to be the best-performing method in the country. Despite us building one of the most frictionless payment systems in the world with 828,000 crores GMV, we still have 45 to 50 percent of all e-commerce volume coming through cash-on-delivery. People still want to pay with notes in a country that is demonetized. 70 percent of tier 2 transactions are still cash on delivery. 90 percent of tier 3 transactions are cash on delivery. That shows you something ! Any new technology starts off being adopted by the tier 1 and then moves or proceeds further along the branches of the country.

Let's move on to women. Did you know that India has the highest female pilot participation rate in the world? But at the same time did you know India has the lowest female labor participation rate in the world? The fact that being a pilot is not easy it requires training, it requires study and at the same time something that women are able to accomplish in such a rate they're not even making it to 20% of the labor force in the country. It's a contradiction and it's an important contradiction to keep in mind as we go forward.

Let's talk about engineers. So if you're watching this there is a high percentage chance that you passed an engineering college. The problem is even though India has the third highest representation of engineers in the world, only 55% of engineers are employable. That number hasn't improved too much over the last four or five years and the main reason for it is that we as a country have focused on producing more degrees and less quality engineers. Again a contradiction.

I'm not here to tell you about the contradictions only in the country. I'm about to tell you about the rise of India in 2022 and why that happened. I'm going to summarize it in one tweet by Balaji Srinivasan " Jio's entry into telephony through the 4G network dropped prices so hard that 41% of the population in India currently uses the internet and has active access to the internet on a daily basis". Not only that, we are much ahead of Pakistan and slowly closing up to China. It doesn't matter what China's absolute numbers are today, it matters how quickly or what the momentum of growth has been and India's momentum has been phenomenal.

But I want to tell you an interesting stat. If you're a business person and you want to make an app, then do it for the mobile phone and not for the desktop as it doesn't make sense. Mobile Internet users have been through the roof. So why has this happened? This has happened because the cost of 1 GB of internet in India has dropped from 268 rupees in 2014 to 6.6 rupees in 2021. It's a phenomenal drop. Unleashed by Jio, every other competitor had to follow suit and drop prices to match or they would lose the digital war in the country. The data consumption per Indian per month was 18.4 GB while in China it was just 14.5 and the global average is much lower at 11.9 GB. Indians are spending their time watching content, video calling, watching movies, soap operas etc. I consider the amount of GB of internet you are using as you spend on attention. And your attention is going toward content that doesn't really make the cut. However, India is still hesitant about money. While 60% of the USA and 50% of China have transacted online, just 10% of India has made a transaction online. Even though we are one of the most extreme consumers of internet across the world. And on that story of consumption, I want to go deeper. I want to show you stats that might shock you. If you have gone to a school where the medium of instruction was in English and where your school fees were more than 12,000 rupees a year, congratulations. You are in the top 13% of Indians in the country. In fact, if your school fees are more than 30,000 rupees per year, you are in the top 3% of this country. And the reasons for that are because of employment. 10% of this country has a permanent salaried gig or a permanent salary job. The rest are all entrepreneurs. Kirana store owners, blacksmiths, medical shops, plumbers etc. India is a self-employed country with very few people having stable employment. This creates a nation of nations. We have three India basis their spending, their likes, their habits, and their attitudes. This is important for you if you ever plan to run a business because you will have to choose who you go after.

At the very top, there is India One. With just 110 million people, this is worth 1 trillion of GDP. These people are English fluent, they are digitally savvy, they know how to use a phone, and they know how to use a computer. They have western values. Some of them have hidden internal values but mostly western. And they value convenience over cost. Don't you !

While you might not like 10-minute delivery, for them it might be more of a need because they are not only extraordinarily busy, they are also extraordinarily lazy. India One uses brands like Oyo and Uber. But if you zoom in, there is even more data here. In fact, at the very top of India One, there is another India called India One Alpha. These are the top 5% of tier one cities and top 0.1% of tier two cities. These are the people that are fully westernized. They have spoken English since the day they were born. These people like brands like Raw Pressery or Little Black Book or Netflix.

Next, there is India 2. Now India 2 has 104 million people and 300 billion dollars of GDP. Even though the sheer number of these people is the same as the previous segment, they contribute less than a third of the GDP. These people are not very comfortable with English, they have some level of digital savviness, it's not great, and most importantly they aspire for a better life. and they feel that a mobile phone and the digital world and the content creators allow them that social mobility. These people still use Facebook and they also spend plenty of their time on apps like sharechat.

Now finally there is India 3. India 3 has 10 times the number of people as India 1. It has 1126 million people and 1.3 trillion dollars in GDP. Now India 3 spends most of their time on YouTube and WhatsApp. They are less educated, they engage in manual labour, they could be the construction person down the streets, but they still hold India afloat. In fact, if you are a business, you need to either target these people or you need to target India 1 because the GDP contribution is the same. But with India 3, there is so much more volume for you to target. I want to explain these four segments of India in two ways.

The first way is to go back to India One Alpha and talk about Netflix. Netflix has 4.5 million paying users in India. Hotstar, which has a lot of vernacular content, which targets India 1 and India 2, has 47 million paying users. But the granddaddy of them all, YouTube, which targets India 1 Alpha, India 1, India 2, India 3, with 467 million users per hour. It is so large that it eclipses the size of the other two combined.

The second way I want to explain this is through a tweet by Kunal Shah, who was speaking to senior folks at e-commerce companies and found that the top 5 million customers probably drive 60% of all online sales in India. And the Indus Valley report, when they spoke to somebody from Amazon, confirmed these numbers and said that even though Amazon Prime's numbers are just five to seven million users, they account for over 50%. This is a tiny user base, but the most valuable. Remember, there are 110 million people in India 1, but Amazon is focusing on just five million of the top of those. COVID made this even worse. If you look at the richest 20% in India, from 2016 to 2021, their wealth grew 39%. If you look at the poorest 20%, their wealth dipped 53%. This is the problem with the kind of system we've created where the rich get richer and the poor get poorer whenever there's economic collapse. Now the India 1, 2 and 3 that I showed you were stats for 2019.

In 2021, that changed. India 1 saw 5 million new entrants, while India 2 became smaller, and India 3 continued to get larger. Now we might think that a country like India's growth is driven by agriculture or it's driven by anything that's physical. But that's not true. India is truly a cloud country and our growth has been bits, not atoms. The IT industry share from 2000 to today has grown from 2.5% to 7.5%. Pre-pandemic it was closing in on 9%. But many a time we overestimate this number. According to the CEO of WazirX, India does not have 10 crore people in crypto. Someone published an incorrect random number and now other parts of the media are picking it up. About 2 crore is a conservative number for the total number of people using crypto in India.

Now, this is something that the founder of Zerodha keeps talking about. Startups that are raising money to go after India 2 and India 3 will fail because even though there are a lot of accounts, they seem not to be transacting users because they make too little money to transact. I'm optimistic, I feel over a 20-year timeline anything can happen. India 2 and India 3 can truly grow up and start making enough money to seriously contribute to the GDP.

But as of today, it seems unlikely. But how does India advance? You see, we've always asked this question, right? How do we give people social mobility? There are three axes of social mobility today. The first one is English, the second one is exams and the third one is an exit. I'm going to explain what these three are. And this is going to offend a few people who don't like the English language, who feel that English is too complicated a language or their mother tongue is better. That may be true. English is probably one of the most convoluted and irritating languages in the world. But it is the language of global opportunity. And it seems that most people who learn English from a young age, especially if they're from tier two or three or three cities, can talk to people from different tiers. Also, they are able to get global opportunities. It truly seems the pathway to success for now. According to Arvind Kejriwal, Government school students mostly come from economically poor backgrounds. When I meet them, their biggest demand is Sir, please teach us English. I am so happy this course is now starting for government school students. Now you might find many people on social media that are anti-English from India. The thing is, the kids know where the future is at. And the kids are actually demanding to learn the language of opportunity. English is not the best language in the world, but it is the language of financial opportunity. And for us to grow as a civilization, we must not only respect our mother tongues, we must also go after the opportunity. Both are important. Because here is where we learn our values. Here is where we contribute those values.

Now I don't need to tell you about this, but let me describe this in numbers. UPSC has 1.1 million test takers, but just 1000 seats. Railways have 12.5 million test takers and 35,000 seats. We have about 60 million test takers in this country, and it turns out for them that getting into a college is more about social mobility than learning anything. The third way to make more money in this country is to actually leave the country. Now, this is one thing that makes me extremely sad. In 1999, only 56,000 people left India. But in 2019, more than half a million people left this country in the hopes of a better education and a better life outside. Your uncles and aunties, every time an Indian becomes the CEO of a large company, your uncles and aunties will send you a message saying see India is great. The problem is that these people have an American passport, they have American values, and they don't live here. They don't create anything for this country. Why are we sitting here and taking credit for that? Because the more we take credit for it, the more we send our kids abroad. Because in our heads it becomes one and the same thing. India is a great country, but we should go work outside. Ironic that the very same people who say wonderful things about India's past are the ones that push their children to go abroad and study. This is something I disagree with and it is something that is fixable with more businesses coming up in this country. Government jobs are few, very hard to get, but well-paid. Most young men in this country spend their 20s preparing for exams and also go to the extremes of rioting when the exams get postponed. Most people can't understand why people riot when the exams get postponed but I'll tell you why. The reason is you block their social mobility and rob their futures from them but there's a fourth axis of advancement one that we should spend more attention on and that axis is enterprise and startups. Now the report goes into some history from 1988 to 2004 we ran several software services companies in the country Infosys was one of them, MassTech was another. In 2004 to 2010 we had red bus and Naukri. In 2010-2016, we had companies like Flipkart, Swiggy and Delivery come out. Then in 2016-2022, we had companies like Khata Book and Unacademy. Many of these companies target different segments of India. Some target the upper segments, India 1 Alpha or India 1, some target India 2 and India 3. It does not matter. The idea is to create better livelihoods, more convenience and more jobs. The IT sector has always been India's growth engine. In 1999, we only had $4 billion in IT revenue. In 2019, we have $177 billion in IT revenue. 35-40% of total exports in 2022 are from the IT and BPM sector. You have no idea what kind of export impact we have from IT. The world looks up to us, the world respects us for our engineering capabilities. From UPI to the IT services, the one reason India has started really shining is our ability to create great software. Now it pains me to see people saying, oh you must not learn to code, oh coding is bad. Look if you don't want to do it, that's great. But do not discourage other people from doing it because today it contributes to half the export volume. It makes not only your and my life easy, but it also makes life easier for people from India 2 and India 3. Most importantly, it creates more jobs for everyone in this country and even for people outside. By direct and gig jobs, IT has gone from having 1.4 million gig jobs to 3.4 million gig jobs in the last five years. The number of startups in India has gone from 3% in 2013 to 12% in 2020. Startups have become mainstream because they are the vehicle of not only excitement, which is what we look at startups for, but also for social mobility for the masses that used English, exams and exit as their only vehicles of social mobility. As long as these startups end up learning how to be profitable, which is going to happen sooner or later, the dance can't continue forever, we will create a better India for India.

In 2021 we are very close to UK we will probably be the third largest soon. Now we're still far behind China and the USA but this is a work in progress. Now many of those companies are going to be useless but at some point, there will be maturity in this market. This is a fresh market. We're still learning we're still teething, don't worry about startups burning money. It happens and the crash that's now here is going to teach them a lesson from which they will recover and create a more mature market. The main reason for venture capital taking off in India is because of Flipkart's exit. When one person does well, other people want to replicate that success. More importantly, India has now become an ecosystem of repeat founders. Founders who have run one company and have now used those learnings to build the next one, creates a more mature ecosystem. Now the report dives into plenty of different types of business in India. It diverges and talks about SaaS businesses, Edtech, Retail, Hospitality, etc. Now, I'm not going to dive into any of those.

I'm going to end this BLOG by talking about the factors that have actually led to the growth of India, that have led to this explosive last two, or three years this country has seen. Number one is the Wang trifecta. So the person who wrote this report, Sajit Pai, once met the founder of Agora, Tony Wang, and he told him that the Chinese consumer economy took off when three things happened. One, cheap bandwidth was available. Two, a smartphone existed in every pocket. And three, a frictionless payment system similar to UPI. India's had this van trifecta emerge, and that is one of the large reasons why India is growing so fast as a tech economy. There's a steady rise in per capita incomes, and that's led by the creamy layer. Now this is true in any civilization, right? In any country in the world, there are gonna be some people who get super rich and the others who follow, and then, you know, there's gonna be a bottom rung. It's just how humans organize themselves. It's also how capital organizes itself. But this creamy layer, as long as they continue to spend, that money recirculates downwards, which is important because it creates new people who can go upwards. Social mobility comes from the top layer of spending and from the three E's, English, exams and exit. Now India's public infra like UPI and Aadhar and open data platforms have allowed different banks to talk to each other. Now, this is gonna piss off some of the crypto people, but we have a centralized system that makes crosstalk possible. It reduces fraud in the system and allows everyone in the country to actually open a bank account. Even though we're not anywhere there, the trends are in a good direction. Next, there are lots of e-commerce enablers, right? If you wanna sell in this country, you had to start a store, go to a place that was crowded, stand there in the store for 10 hours a day and hope somebody bought from you. For the first time in decades, we have the ability to sell online and this has been made possible by Flipkart and Amazon. Soon, I would also love to see what ONDC does and whether it makes it possible for everyone in India to sell. Finally, if you want to change anything in this country, you have to have talent. And today we have a flywheel of talent. Thankfully, more people are entering tech, more people are building things of value to the next person, and more people have entered the workforce and creating value, whether by creating jobs or by creating value in their jobs. Now that ends my analysis of the REPORT.

Now, I truly believe as a country we're growing up. I truly believe this explosion of tech in the country is making everyone's lives better. There might be some companies you don't like, there might be some companies that are unprofitable and will die, but that's okay. As a country, we must learn how to forgive the mistakes of the few for the benefits of the masses. I feel as a country we're so stuck in the past that we forget that a revolution is happening in the present and for the future. Let us refocus our eyes here and build a better nation today rather than mull over whether we were a better nation many many years ago.

That's it for me, bye!

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