Investing in both US and India

 The video transcript features a discussion between Saurabh Mukherjea (CIO of Marcellus Investment Managers) and Nandita Rajhansa (Economist) regarding the strategic necessity of diversifying investments between the Indian and US stock markets.

The following is a summary of the key points discussed in the sources:

The Problem: Constant Rupee Depreciation

• Historical Trend: Since 1991, the Indian Rupee (INR) has consistently lost approximately 40% of its value against the US Dollar (USD) every decade.
• Economic Rationale: This happens because inflation in fast-growing developing economies like India (affecting costs for healthcare, education, and transport) is significantly higher than in richer countries like the US. To keep exports competitive, the currency naturally depreciates.
• Impact on Wealth: A typical Indian family faces heavy taxation (Income Tax and GST) followed by currency depreciation. Consequently, out of every $100 earned, a family may only have $30 left in real terms to fund retirement or education after these factors take their toll.

The Solution: The 50-50 Investment Strategy

• Double-Digit Returns: India and the US are the only two major global markets that have consistently delivered double-digit dollar returns over 10, 20, and 30-year horizons.
• Low Correlation: The correlation between the two markets is low, meaning they do not always move in tandem; when one market underperforms, the other often holds up well.
• The "Markowitz" Effect: By maintaining a 50-50 split and rebalancing annually, investors can achieve higher returns with lower volatility. For example, while both the Nifty 50 and S&P 500 gave roughly 14% returns over 20 years in rupee terms, a rebalanced 50-50 portfolio would have yielded 15% because rebalancing forces you to "buy low" in the cheaper market and "sell high" in the expensive one.

Regulatory Reforms and Accessibility

Prior to 2023, global investing was largely reserved for the elite due to high capital requirements and "brutal" taxes. However, the Indian government introduced four major reforms to democratize access:

1. Gift City (IFSC): Created a legal framework (International Financial Services Centre Act, 2020) that allows Indians to manage global investments from within India.
2. Tax Harmonization: In July 2024, the Long-Term Capital Gains Tax (LTCGT) for foreign investing was reduced from 20% to 12%, matching domestic investment rates.
3. Liberalized Remittance Scheme (LRS) Easing: The RBI simplified the process for individuals to use LRS funds to invest or spend abroad (e.g., for foreign education or holidays) via foreign bank accounts.
4. Overseas Portfolio Investment (OPI): Since August 2022, Indian corporates can invest up to 50% of their net worth abroad through Gift City.

Practical Implementation

• US Dominance: The US currently accounts for 70% of the world's market capitalization and 55% of global profits, largely driven by its dominance in technology (AI, Cloud, and software).
• Investment Options: Investors can access these markets through vehicles like the Global Compounders Fund based in Gift City or by investing in benchmarks like the Nasdaq, which has delivered nearly 20% returns in rupee terms over the last decade.
• Conclusion: The speakers emphasize that while it is important to maintain a presence in the home market (India), splitting investments 50-50 with the US market is the most effective way to combat rupee depreciation and build long-term wealth for global aspirations.

Recent Indian Fiscal reforms and its impact

 

The Great Indian Reset: Fiscal Reforms, Consumption Booms, and the AI Challenge

India is currently navigating a significant economic transition, marked by a "Great Reset" in fiscal policy and consumption patterns. Recent discussions highlight how the government is shifting away from heavy taxation on the middle class toward a stimulus-driven approach to revive the economy.

The Consumption Boom: A Tale of Silver and Cars

The festive season of 2025 served as a clear indicator of a consumption rebound. On October 18, 2025, India hit a historic milestone by selling 100,000 cars in a single day. This surge wasn't limited to automobiles; the demand for silver during the Dhanteras period was so intense that it exhausted local supplies and even caused a liquidity squeeze in the London bullion market, with major refiners like MMTC-PAMP and institutions like JP Morgan running out of stock. This boom was largely attributed to much-needed GST cuts that took effect in September 2025.

Fiscal Reforms and the ₹6.3 Trillion Stimulus

The primary driver of this macroeconomic shift is the unwinding of heavy tax burdens previously placed on the middle class. Between FY19 and FY25, income tax collections from the middle class doubled from ₹5 trillion to ₹10.5 trillion, representing a 17% CAGR. To reverse this, the government has implemented several reforms:

• Tax Relief: In the February 2025 budget, income tax was eliminated for those earning up to ₹12 lakhs.
• GST Reductions: Significant cuts in GST have been enacted to spur retail trade.
• Liquidity Injection: These tax cuts, combined with the ban on online gambling and a proposed curtailment of retail F&O (Futures & Options) trading, could inject roughly ₹6.3 trillion (1.8% of GDP) back into the economy. Even without F&O intervention, the stimulus stands at approximately 1.6% of GDP.

Structural Challenges: AI and the "Middle Income Trap"

Despite these fiscal boosters, structural risks remain, particularly regarding Artificial Intelligence (AI) and its impact on the labor market. The sources suggest that the traditional Indian economic model—where education leads to a stable office job, which then drives 60% of GDP through consumption—is under threat.

• AI vs. Traditional Employment: AI-oriented firms require significantly fewer people to achieve massive scale; for example, while Microsoft employs roughly 250,000 people, Open AI operates with 20,000, and China’s DeepSeek with only 2,000.
• The Middle Income Trap: There is a concern that India could fall into a "middle income trap," where the economic model that worked for a poor country fails as it reaches mid-income levels ($5,000–$8,000 per capita). Historically, countries like Brazil and various Southeast Asian nations have struggled to rebuild once their initial growth models were disrupted.

Infrastructure and the Multiplier Effect

While the government has spent heavily on infrastructure (highways, railways like Vande Bharat, and defense), these projects are increasingly capital-intensive rather than labor-intensive. Modern road construction now requires only about 1/5th of the labor it did a decade ago. Consequently, while the infrastructure is high-quality, its "economic multiplier" is modest because it doesn't generate massive middle-class employment.

The "Losing Games": Gambling and F&O Trading

A significant portion of middle-class wealth has been drained by speculative activities.

• Online Gambling: Before the ban, Indians were reportedly losing $8 billion annually to online gambling.
• F&O Trading: SEBI data indicates that retail investors—mostly men aged 30-40 from small towns—are losing $12 billion a year in the F&O market. This is described as a tragic transfer of wealth from the Indian lower-middle class to global institutional elites.

The Path Forward: The Gig Economy and Savings

As office jobs become scarcer due to AI, the sources predict a massive shift toward gig work, including data cleaning, bot training, and specialized consulting. Because gig income is more volatile than traditional salaries, there is an urgent need for Indians to increase their savings buffers. Currently, net household savings as a percentage of GDP are at a 50-year low, a trend that must be reversed to provide a financial cushion for the coming labor market transition.

Why your savings are vanishing faster

 

The Middle-Class Squeeze: Why Your Savings Are Vanishing and How to Fight Back

If you feel like your bank account is draining faster than ever despite your best efforts to save, you aren't alone. In a recent discussion between Saurabh Mukherjea (CIO of Marcellus) and economist Nandita, they delved into a startling reality: the Indian middle class is facing a "double whammy" of stagnating wages and skyrocketing costs for essential services.

Here are the key takeaways from their conversation on why the traditional "conservative Indian" saving model is under threat.

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1. The Illusion of Low Inflation

While official government figures like the Consumer Price Index (CPI) might suggest inflation is near 0.7% or 5%, these numbers do not accurately reflect the middle-class experience.

• The Food Trap: Roughly half of the official CPI basket is composed of food. While this is relevant for lower-income groups, the typical middle-class household spends a much smaller fraction of their income on food.
• The Service Surge: For the middle class, the real "inflation" is driven by education, healthcare, and transport. Private hospital costs are rising at 14% annually, while secondary education costs grow at approximately 9-10%.
• The Reality: If you recalculate inflation based on what the middle class actually consumes, the rate is closer to 8-9%, meaning the cost of living doubles every seven to eight years.

2. The Wage Gap: Shrinking "Real" Salaries

The most alarming data point discussed is the disconnect between salary growth and the cost of living.

Analysis of Nifty 50 companies shows that over the last eight years, average employee compensation grew by only 2% per annum. When compared against even the official CPI inflation of 5%, real wages are actually shrinking by 3% every year. If you use the more realistic middle-class inflation rate of 9%, real salaries are effectively dropping by 5-6% annually.

3. The "Social Media" Debt Trap

Beyond rising costs, a psychological shift is driving the middle class into debt. The "Jio effect" of 2016 brought cheap, near-free broadband to India’s young population, leading to a false sense of parity created by social media.

• Imitating Billionaires: Social media allows someone in a suburb to watch the elite lifestyle of South Bombay billionaires. This creates a drive to mimic that lifestyle, leading people to take out personal loans for non-essentials like high-end smartphones and glamorous holidays.
• Borrowing to "Look" Good: Data shows the most common use for personal loans today is to buy mobile phones, followed by funding vacations. This "false glamour" dynamic is driving household borrowing to unprecedented levels.

4. A 50-Year Low in Savings

The result of these factors is a national financial crisis. Net household financial savings as a percentage of income are currently at their lowest level in 50 years (since 1977).

Outside of home loans, Indian household borrowing as a percentage of income has hit 34%, a figure significantly higher than that of major economies like the US or China. People are no longer just borrowing for emergencies; they are borrowing to maintain a lifestyle their stagnant salaries cannot support.

5. The Path Forward: The Math of Compound Interest

To survive this environment, the sources emphasize returning to the math of compounding rather than the "math of social media."

For example, to maintain a modest retirement lifestyle today (costing roughly ₹20 lakhs per year), a 30-year-old would need to invest approximately ₹1.1 crore today to have a corpus of ~₹19 crores by age 60, assuming a 10% net return. For someone closer to retirement (around age 50), that immediate investment requirement jumps to ₹2.5 crore.

The Bottom Line: To protect your future, it is vital to recognize that your "real" inflation rate is much higher than the news suggests. Avoiding high-interest debt for lifestyle choices and focusing on aggressive, long-term compounding is the only way to bridge the widening gap between income and expenses.