Winner takes all

What's responsible for the polarisation in profits and wealth creation in the Indian markets

- SAURABH MUKHERJEA

We are seeing the rise of a new, more efficient, more digital and more scalable India. According to the National Payments Corporation of India (NPCI), peer-to-merchant (P2M) UPI transactions recorded 138 per cent YoY growth in November 2022 see chart Peer-to-merchant UPI transaction volume' which shows that in November alone, India recorded four billion peer-to-merchant transactions! If we look at the digital payments data in India, National Electronic Fund Transfer (NEFT) accounts for 55 per cent of all digital transactions in FY22. Going further, if we look at transactions done via smartphones [which include UPI (16 per cent share), Immediate Payment Service or IMPS (12 per cent) and e-wallets (1 per cent)], they account for another 29 per cent, which brings the total to 84 per cent. If we again add the share of debit and credit cards, another 3.5 per cent is added, which brings the total to 87.5 per cent. Therefore, as of FY22, around 88 per cent of transactions in India (by value) were via digital methods of various sorts (source: SBI Research, 2022).

UPI and the digitisation of business activity in India is one of the several factors driving an exponential surge in the concentration of corporate profitability in India. India's 20 largest profit generators earned a staggering 80 per cent of the nation's profits as compared to around 40 per cent a decade ago (see chart 'PAT and FCFE of the top 20 PAT generators in India'). This, in turn, is leading to an increasingly polarised stock market.