Mumbai, India — Home to 22 million people and the financial capital of the second most populous nation and the largest democracy in the world.
This past month in December, I had the opportunity to visit the city for a month. While I was there I learned a lot about the country, the population there, and problems people face on a daily basis.
#1. Services are Extremely Cheap
If you were to get a haircut in India it would cost you around 50 rupees. That converts to less than one dollar. This same principle holds for all other types of services including food and drink, clothing, and transportation.
The fact that services are cheaper in less developed countries is often known as the Balassa-Samuelson effect. A US dollar in India can buy you a lot more than a US dollar can in America.
This is a basic economic principle that you learn in Macro 101 but I never fully understood the magnitude behind it. Everything in India seemed so cheap to me (goods and services) because I had been anchored by American prices.
Because services are so cheap, if you earn a lot of money in India, your lifestyle can be very good. An example of this is housekeeping. In order to have a full-time servant in Mumbai, it costs 15,000 rupees which are around 200 dollars. This is pretty affordable for most middle-class Indian citizens so you will see a lot more housekeepers in Indian households than you would see in America.
There are some hacks that a lot of people do to take advantage of this phenomenon. One is that a lot of Indians migrate from India to work in the Gulf (Middle East), or if they can get permanent residency, Canada. They earn in dirhams or dollars, which is a much stronger currency than the rupee, and then return back home when they are done.
#2 The Extreme Income Inequality
In India, there is no concept of a “minimum wage”. Millions of people there live in absolute poverty, in states of being that cannot even imagine. On the other side, there is also a lot of wealth concentrated in India. If you go to the right neighborhoods in Mumbai, like Bandra and Andheri, you will see people living in 60-story high rises, fully decked with tennis courts and swimming pools which can cost more than 1 million dollars for a 3 bedroom apartment.
When I was in India I got the opportunity to see both sides of the spectrum. I am fortunate to have family that is doing well off in India and is part of the group where wealth is concentrated. However, I also know people who live in chawls, which are like a step-above the slums.
Getting to see both sides of the spectrum really made me appreciative of the luxury of life that I live today. I have to be incredibly grateful to have landed in the place I am today. Probabilistically, I could have easily ended up as one of the 64 million in India living in a city slum but somehow I ended up in an America. This realization has been a very humbling realization for me.
The worst part about this reality is the humanity behind it. 64 million is a hard number to grasp. But if you look at each individual case it becomes much more impactful.
Take the case of the 8-year-old selling trinkets on the side of the road. If you pluck him out of that situation and put him in a family where he will get an education, and learn habits that will give him compounding benefits, he will do good for himself in life. The reality is that it is not possible to do this, and the child will continue to grow up in that bad situation. There they will learn bad habits/mindsets that will perpetuate their poverty.
There was nothing special about my genetic code that made me more meritable to be born into my privileged situation. There is nothing inherently better about me than the kids living in the slums to get this opportunity. I got extremely lucky. If you are reading this, you are probably also extremely lucky that in the lottery of life you ended up where you are.
This trip more than anything made me believe that where you born in life is a HUGE part of the equation into where you end up in life. More than I thought before. This is just one of the harsh realities of life, and we have to be eternally grateful for making out well in the distribution curve
#3 Cheap 4G Data + Access to Mobile Phones
India according to the Economic Times has the cheapest mobile data in the world. While I was in India, I had a plan that gave me 200 GBS of data (shared across 4 lines) for 15 dollars. Per GB in India it costs, on average, 26 cents while in the US it costs 12 dollars. This is huge 🤯.
This is largely due to how competitive the Indian telecom market is. There are three big players: Reliance Jio, Vodafone Idea, and Airtel. Jio entered the market in 2016 and has undercut a lot of the profits of the other two players. All three currently are supplying data at very low margins and at an unsustainable rate that Vodafone is actually rumored to be going bankrupt.
The outcome of this is a large consumer surplus, and a lot of people — rich and poor having access to high-speed data. Even people like house servants and rickshaw drivers have access to this technology and use services like Youtube and WhatsApp. There are an estimated 800 million mobile phones in India.
With such a large consumer base comes a lot of opportunities. Even if you segment only 1% of the population that is still 8 million people using your application. While I was in India I saw a lot of different mobile app unicorns that have taken India by storm. Some are basically the Indian version of what an American company does in America. For example, Paytm to Paypal, and Lenskart to Warby Parker.
There were also some cool ideas that I saw working in India that could possibly translate to American markets. One is home-to-home delivery by companies like Swiggy. You order food from someone directly in your apartment building.
#4 Housing is in a Crisis
Mumbai, simply put is overpopulated. There is a lot of people and not a lot of land. Around 22 million are living on a skinny peninsula.
You would think given this shortage of land that there would be lots of skyscrapers in Mumbai however this is not the case. While there are a fair-share of high-rise buildings in Mumbai, a lot of the building are relatively flat.
A large reason for this is due to extremely constrictive urban-planning. Cities use what is called Floor-Space Index(FSI). Basically, limits how much you can build on top of the land that you own. The higher the FSI the higher you can build. In Mumbai, the FSI is very restrictive and can be as low as 1.3 whereas in New York it is 12 and in Singapore, it is 25!
By having a higher FSI taller apartments are built and the city begins to shoot upward. India has not been growing upward which contributes to the reason why prices shoot up higher as well.
This has created more repercussions which largely affect the lower-class population of India. With the prices being higher many families are priced out of the market and have to turn to slums or chawls to live in.
In all, I think I learned a tremendous ton from the trip to India. It gave me a new perspective on life and I experience a totally new culture. Not to mention I ate like 4,000 calories a day there 😂.
India is such a unique and evolving place that it is so fascinating to study and do research on it 😁. And, in complete honesty, could definitely see myself living there (if in the right circumstances)