Notes on the next decade
Before getting into specific sectors, I want to share how I look at businesses and why only some of them become good investment opportunities.
01 / First Principles
Why does a business exist?
A business exists to solve a problem a customer will pay for, at a cost lower than what they pay. Fundraising, valuations, and brand campaigns come later.
Whether it stays profitable comes down to supply and demand. If ten others can set up the same supply in six months, competition will eat your margins. You see this with thin software tools and consumer brands using the same contract manufacturers. Everyone ends up spending heavily on marketing just to stay visible.
Good businesses sit where demand is growing, but new supply takes years to build. You rarely find these gaps in macro reports. You find them by going deep into a niche: how the product is made, why current options fall short, and what stops someone from copying it quickly.
Typical lead time before new capacity works at scale
The easier it is to add supply, the faster excess returns get competed away into customer acquisition costs.
What makes it an investment?
A good business is not always a good venture investment. Many good businesses can grow comfortably from their own customer cash flows. Outside capital only makes sense when it unlocks something that would not happen otherwise.
- Paid for without marketing dollars: Customers buy because the product solves a real problem, not for discounts.
- Supply is the moat: Whether it is village milk collection, soil testing, or five-axis machining, the hard part sits in physical execution rather than ad spend.
- Upfront effort turns into operating leverage: Building a factory, hospital network, or hardware product is slow early on. Once capacity fills up, unit costs fall and cash flows compound.
- Inelastic pricing power: Buyers care more about reliability, purity, or uptime than saving 5% on price. That leaves room for healthy margins without price wars.
- Capital that matches duration: If an engineering or supply chain problem takes six to eight years to solve, you cannot build it with money that needs a quick markup in two years.
How I Look at a Business
Three questions before looking at financial projections
| Layer | Question | What I Look For |
|---|---|---|
| 1. The Business | Why does it exist? | A clear problem customers will pay for without discounts. |
| 2. The Niche | How hard is supply? | Growing demand where new supply takes years of work or trust to build. |
| 3. The Capital | Why raise money? | Capital goes into capacity, R&D, or distribution that creates real impact. |
02 / Household Incomes
The biggest shift in India over the next decade is in household incomes.
In 2020-21, two-thirds of India's 301 million households earned less than ₹5 lakh a year. By 2030-31, the bottom two brackets will shrink in absolute numbers. Around 74 million households will move into the middle class (₹5 to ₹30 lakh), and another 24 million will cross ₹30 lakh.
households earned above ₹5 lakh a year (102M of 301M total). Only 4 in 100 earned above ₹30 lakh.
households projected above ₹5 lakh a year (200M of 358M total). 11 in 100 cross ₹30 lakh.
Indian Household Income Slabs
Constant 2020-21 prices • Source: PRICE ICE 360° Survey
| Income Group | Annual Income | 2020-21 | 2030-31E | Share (21 → 31E) | 10Y Change |
|---|---|---|---|---|---|
| Destitute | < ₹1.25 Lakh | 45M | 20M | 14% → 5% | -56% |
| Aspirers | ₹1.25L to ₹5 Lakh | 154M | 138M | 52% → 37% | -10% |
| Middle Class | ₹5L to ₹30 Lakh | 91M | 165M | 31% → 47% | +81% |
| Rich / Affluent | > ₹30 Lakh | 11M | 35M | 4% → 11% | +218% |
| Total India | All Households | 301M | 358M | 100% (1.42B → 1.53B) | +19% |
03 / Tax Filings
Survey projections can be off, so it helps to check them against actual income tax returns.
Between FY21 and FY26, individual tax filings grew from 6.37 crore to 8.22 crore, driven by higher brackets. Filings under ₹5 lakh dropped 20%, while the ₹5 to ₹10 lakh bracket grew 81%. Filers between ₹10 lakh and ₹50 lakh more than doubled to 1.50 crore, and those above ₹1 crore grew 128%.
About 1.62 crore Indians now declare over ₹10 lakh a year, double the number from five years ago. Still, that is just over 1% of our population. The base is growing fast, and it is still early.
Individual returns declaring gross income > ₹10L
Includes ₹10L to ₹50L (1.50 Cr), ₹50L to ₹1 Cr (7.64L), and >₹1 Cr (3.86L). Source: CBDT & Income Tax Portal.
Income Tax Filings by Slab
Individual ITRs filed • Source: CBDT & Income Tax Portal
| Income Slab | FY21 Filers | FY26 Filers | Share (FY26) | 5Y Change |
|---|---|---|---|---|
| Up to ₹5 Lakh | 3.47 Cr | 2.76 Cr | 33.6% | -20% |
| ₹5 Lakh to ₹10 Lakh | 2.12 Cr | 3.84 Cr | 46.7% | +81% |
| ₹10 Lakh to ₹50 Lakh | 72.2 Lakh | 1.50 Cr | 18.3% | +108% |
| ₹50 Lakh to ₹1 Crore | 3.95 Lakh | 7.64 Lakh | 0.93% | +93% |
| Above ₹1 Crore | 1.69 Lakh | 3.86 Lakh | 0.47% | +128% |
| Total Returns | 6.37 Cr | 8.22 Cr | 100.0% | +29% |
04 / Consumer Scarcity
Once a family crosses ₹10 lakh in annual income, basic needs like grains, clothes, and mobile data are covered. Extra income goes toward a better home, travel, health, clean food, and savings.
When millions of families want these things at once, physical supply struggles to keep up. You cannot build a good hotel, a clean dairy supply chain, or a hospital overnight. Japan in the 1970s, South Korea in the late 1980s, and China after 2008 went through this same shift after crossing $3,000 in per-capita GDP.
India enters this phase with very low physical capacity per person, so the runway to build locally is long.
Inpatient & recovery capacity across Asian economies
Source: WHO & World Bank. A similar gap exists in hospitality: India has ~1.8 lakh branded hotel rooms vs. ~45 lakh in China.
What Changes Past $3,000 Per-Capita GDP
Historical shifts in East Asia vs. India
| Country | Period | GDP / Capita | Where Spending Grew Fastest |
|---|---|---|---|
| Japan | 1972 to 1980 | $2,900 → $9,400 | Urban housing, rail travel, quality food, retail banking |
| South Korea | 1987 to 1996 | $3,500 → $13,000 | Apartments, leisure & hotels, hospitals, financial services |
| China | 2008 to 2017 | $3,400 → $8,800 | Domestic travel & hotels, diagnostics, protein & dairy, wealth products |
| India | 2025 to 2035E | $2,900 → $6,500+ | Housing, travel & leisure, clean food, financial services, healthcare |
Five niches where supply lags
In each of these areas, demand is growing fast while new supply takes years of land, trust, or execution to add.
- Housing: Families upgrading from basic apartments want reliable water, power, and open spaces. Good city land with clean titles and trustworthy builders takes years to put together.
- Travel and Leisure: We have built highways and airports faster than good places to stay. India has about 1.8 lakh branded hotel rooms across the whole country, less than many single cities in Asia. Clean, mid-priced stays near big cities are hard to find.
- Clean Food: With rising diabetes and lifestyle illness, more families read labels and want clean staples. The hard part is not branding or 10-minute delivery. It is farm sourcing, soil testing, and cold chains that keep milk and produce fresh without preservatives.
- Financial Services: As households move money from gold and fixed deposits into financial markets, they need simple products and honest advice that does not depend on commissions.
- Healthcare: As parents age in nuclear families, hospitals alone cannot handle long-term care. We need affordable diagnostics, rehab centers, and home care that keep patients out of hospital beds.
05 / What India Imports Today
Rising incomes show what households will buy. Trade data shows where our factories and infrastructure remain fragile.
Over the last decade, India has set up assembly lines for phones, EVs, solar panels, and medicines. Still, if you look one layer deeper at the metals, chemicals, magnets, and machines feeding those factories, we import almost everything from one or two countries.
Buying from the cheapest global supplier worked when trade was open. Today, countries use export controls on minerals, magnets, and factory tools as leverage. If supply tightens tomorrow, large parts of Indian industry will struggle to run.
Critical Imports in India's Supply Chain
Share of domestic demand met by imports • Source: Ministry of Mines, CSEP, GTRI & IMTMA
| Material / Input | Import Share | Main Suppliers | What Stops If Cut Off |
|---|---|---|---|
| Lithium, Cobalt & Nickel | 100% | China (refining), Chile, Australia | EV batteries, grid storage, electronics |
| Rare-Earth Magnets (NdFeB) | >90% | China (~90% global processing) | EV traction motors, wind turbines, drones |
| Solar Wafers & Polysilicon | >90% | China | Domestic solar cell and panel plants |
| CRGO Electrical Steel | ~90% | China, Japan, South Korea, Russia | Power grid and distribution transformers |
| Potash & Phosphate Inputs | 85-100% | Canada, Russia, Jordan, Morocco | Fertilizers and farm productivity |
| Pharma KSMs & Bulk APIs | 65-70% | China (80-90% in antibiotics) | Basic medicines, antibiotics, paracetamol |
| High-Precision CNC Machines | 60-65% | Germany, Japan, Taiwan, China | Auto, aerospace, and electronics factories |
Take power transformers as one example. India needs about 4.0 to 4.5 lakh tonnes of cold-rolled grain-oriented (CRGO) steel every year to build transformer cores. Domestic mills produce less than 50,000 tonnes. The rest has to be imported.
Small input, big hold-up
Often, the imported part is a small fraction of the final product's cost, yet missing it stops the entire line. You cannot ship a ₹12 lakh electric car without ₹3,500 worth of magnets, and you cannot turn on a ₹500 crore solar park without a ₹4 crore transformer.
That cost gap makes buyers care far more about reliable supply than saving a few percent on price.
of total product cost, yet 100% line-stopping if supply is cut
| Imported Input | % of Cost | Imported | Product Held Up |
|---|---|---|---|
| NdFeB Magnets | ~2-3% | >90% | ₹2-15L EV / Wind |
| CRGO Core Steel | ~18-22% | ~90% | Power Transformer |
| CNC Controller | ~25-30% | >80% | Precision Machine |
| Fermentation KSM | ~15-20% | 80-90% | Antibiotic Plant |
wait time for high-voltage grid hardware and custom tooling
| Bottleneck Hardware | Unit Cost | Wait Time | Asset Delayed |
|---|---|---|---|
| 220-400kV Transformer | ₹4-8 Cr | 20-30 mos | ₹500 Cr Solar / DC |
| 5-Axis CNC Center | ₹2-5 Cr | 10-16 mos | Aero / Defense Line |
| Grid Battery (BESS) | ₹1.5 Cr/MWh | 12-18 mos | 24x7 Industrial Power |
| Space Thrusters | ₹1-3 Cr | 12-24 mos | EO Satellite Launch |
06 / Industrial & Sovereign Tech
A country of 1.4 billion people cannot rely on imports for its power grid, factory machines, critical materials, and defense.
You cannot fix these gaps with a software tool or a quick trading business. Solving them takes five to eight years of metallurgy, hardware engineering, and factory testing before large revenues show up. That is why patient capital fits naturally here.
Where Domestic Capacity Is Needed
Replacing critical imports across India's industrial stack
| Layer | Bottleneck | Development Time | What Needs to Be Built |
|---|---|---|---|
| Power Grid | HV Transformers & Storage | 20-30 mo wait | Grid storage, transformers, fire-safety materials, commercial clean power |
| Metals & Motors | Rare-Earths & Electrical Steel | 4-7 yr R&D | Rare-earth-free motors, mineral refining, battery recycling |
| Factory Tools | CNCs, Spindles & Test Rigs | 5-8 yr R&D | Multi-axis CNCs, actuators, inspection systems, industrial robotics |
| Space & Defense | Satellites & Propulsion | 5-8 yr R&D | Earth observation satellites, solid propulsion, navigation sensors |
Four areas to build at home
Pure assembly works only when global supply chains stay cheap and calm. Domestic engineering works in calm times, and matters even more when trade tightens.
- The Power Grid: Setting up solar plants is no longer the main bottleneck; moving and storing that power is. As EVs, factories, and data centers grow, India needs grid batteries, transformers, fire-safety materials, and simpler ways for factories to buy clean power.
- Engineering Around Missing Materials: Where India lacks local deposits of rare earths or lithium, there are two options: build refining and recycling capacity at home, or design products that do not need the imported material—like motors built without rare-earth magnets.
- Factory Machines: Walk through an Indian factory making electronics or auto parts today, and almost all the CNC machines, spindles, and testing rigs are imported. Building precision factory tools in India is a multi-decade opportunity.
- Space and Defense: Imported hardware gets cut off right when you need it most. India needs domestic teams building satellites, radar sensors, and rocket propulsion from scratch.
Why Domestic Engineering Wins in More Worlds
Comparing import-reliant assembly vs. deep domestic capacity across scenarios
| World / Scenario | Import-Reliant Assembly | Domestic Deep Engineering |
|---|---|---|
| 1. Open Trade & Calm Supply | Works, but low margins due to easy competition | Wins on local customization, faster service & freight savings |
| 2. Tariffs & Rupee Depreciation | Imported BOM costs rise and squeeze margins | Strong pricing umbrella against pricier imports |
| 3. Export Controls on Minerals | Factory lines stall waiting for foreign permits | Wins via local refining, recycling, or magnet-free designs |
| 4. Global Shortage (24-Mo Wait) | Indian buyers placed at the back of global queues | Captures long-term domestic order books at healthy margins |
If you are building or thinking about any of these areas, I would love to chat. Write to me at dinesh@zerodha.com, or reach out on LinkedIn or X.
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