The World As We See It

May 2021


It’s been over a year since the pandemic broke out, and what a colossal loss it has been of both lives and livelihoods. At last count, we have suffered 151 million infections and 3.18 million deaths, let alone the billions of dollars in lost productivity. However, we adopted technology with open arms, made peace with a socially distant life, adopted the work from anywhere culture and got used to wearing masks like they were part of our regular facial adornment. In an unprecedented display of unity and collaboration, humankind came together, invented several effective COVID-19 vaccines, manufactured them at scale, all in such a short period, and ensured we are on the path to achieving herd immunity soon.

Given the fragile state of global businesses and economies, we expect central bankers to maintain low-interest rates, which are always very supportive of valuations and flows. A closer look reveals that stock prices are not yet in the bubble zone despite these lower rates since private sector balance sheets are not yet overly leveraged. The global financial system remains flush with central bank supported liquidity, and certain alternative asset classes are seeing buoyant, if not stratospheric, price levels. International institutional investors’ hunger for higher yields supports these levels as they seek to average out their near-zero per cent yielding bonds. Commodity prices are on an upward trajectory, as seen with crude oil (supported by unilateral production cuts by Saudi Arabia), copper (where prices are at their highest levels since 2011), aluminium and steel. The geopolitical risks we are keenly watching are US-China trade dynamics and digital taxes that countries have started seriously considering and implementing.


A mere 1.9% of India’s population has been fully vaccinated with two vaccine shots, while 11% or 157 million people have received at least one dose.

The daily vaccination pace has to inch up beyond 4 million as the ongoing second wave spreads faster at nearly 400,000 positive cases a day. The saving grace is the low fatality rate at 1.1% though whisper numbers are significantly higher. These elevated COVID-19 case levels can act as a dampener to the ongoing recovery in businesses and the general economy as major cities, and a few states have announced another round of stricter lockdowns.

However, easy liquidity conditions and fiscal support for building infrastructure, positive global growth, and the ongoing vaccination programs might help economic recovery maintain its growth path. The recent budget can be a game-changer. It brings about some required reforms like bank and insurance privatisation, enhanced infrastructure funding, and foreign funding relaxations. In its World Economic Report, the IMF estimates India to grow at 12.5% for the year 2021 though we estimate this will be far more tepid given the current on-the-ground situation. Notably, the INR depreciated below 74 to a US$ on the back of a resurgent COVID-19 spread and RBI’s accommodative policy stance.

Startup Ecosystem 

The Indian startup ecosystem started 2021 in a genuinely boisterous style. While the number of deals consummated declined by 10% (from 382 to 344), the capital invested in startups doubled (from US$ 3.49 billion to US$6.98 billion), leading to an uptick of 122% in average deal values (from US$9.14 million to US$20.30 million).

While many underlying factors drive these numbers, the most significant reason is the number of large deals closed in the ecosystem in 2021. In the current calendar year, India has already witnessed twelve companies joining the coveted Unicorn Club (startups valued at over US$1 billion) compared to eleven companies joining the unicorn club in all of 2020 and seven in 2019.

As the nation braces itself for another wave of lockdowns, we remain optimistic about the future of the Indian startup ecosystem. 2020 gave the ecosystem unprecedented tailwinds as people spent months at home adopting digital technologies for online consumption, whether through online food delivery, e-commerce, or content consumption. Technology-enabled businesses experienced adoption at levels never seen before. While many companies perished, those who survived have showcased the true grit and determination of Indian entrepreneurs. 

Innovation remains at the core of productivity-focused new-age businesses. The US Chamber of Commerce Global Innovation Policy Center recently came out with the 2020 edition of its International Intellectual Property Index. India ranked 40 out of 53, maintaining its standing. India’s overall score increased by 36%, primarily due to legal reforms and precedence setting judgements against IP infringement. Another measure of innovation, the Global Innovation Index 2021, ranks India at 48 out of 131 countries, moving it up four places from the 2019 rankings. As India walks the course to become a global innovation hub, we are optimistic that its efforts to address problems will bear fruit in due course.