Observers increasingly regard India as the new China in terms of economic potential and investment opportunity. India has now surpassed China as the world’s most populous country, with an estimated 1.426 billion people compared to China’s 1.425 billion, according to the World Population Review. Additionally, India has outpaced China in economic growth over recent years.
Experts credit a reform-minded government in India that has been pushing forward investments, particularly bolstering the technology and services sectors. Abhijit Shankar Singh, Managing Director at Nippon Life India Asset Management, emphasizes, “India is too significant to be overlooked.” However, there is some uncertainty due to ongoing elections, which will conclude on June 1. “Indian elections are notoriously complex and hard to predict, but after a decade of solid growth, it is expected that Narendra Modi will secure a third term,” states Amol Gogate, Fund Manager at Carmignac Portfolio Emerging Discovery.
The Drivers of Steady Growth in India
For years, expectations have been high for India, where the population has doubled since 1968. “India has a very young population compared to China, which is facing an aging demographic,” notes Elke Schoeppl-Jost, Regional Investment Head APAC, DWS. Despite China still being economically ahead by about 20 years, India’s economy has been rapidly advancing. According to Xtrackers, the Indian economy has grown by an average of nearly seven percent per year over the past 30 years. The country has evolved into an increasingly integrated and liberal market economy, enhancing its resilience against global shocks.
Yet, it is important to acknowledge that India still faces significant challenges: high bureaucracy, a deficient education system, high youth unemployment, and a low female labor participation rate, among others. Nonetheless, improvements are ongoing. Experts mark 2014 as a turning point, primarily due to Prime Minister Narendra Modi’s pivotal role in India’s recent successes.
Technology as a Catalyst
India has become a key player in the global technology sector. “There is also a high acceptance of technology among Indian consumers,” says Singh. He credits political leadership with improving infrastructure, which in turn boosts prospects for Indian businesses. A study by the Friedrich Ebert Foundation highlights sectors such as the automotive industry (including suppliers), information technology, machine tools, pharmaceuticals, oil, and oil products as growth areas for India. The automotive and software industries, in particular, underscore India’s appeal as a business hub.
Investing in India with an ETF
“We are seeing eased market access for foreign investors and the associated effects on UCITS funds,” states Olivier Souliac, Head of Indexing Xtrackers Products at DWS. This is reflected in an increasing share of Indian government bonds in global indexes. “India is becoming more attractive to European investors,” concludes Souliac. For those looking to invest in this Asian nation, an ETF is recommended. There are two options: an emerging markets ETF, where India now constitutes about 20% due to its stock market outperforming the broader emerging market index over the last decade, albeit with higher volatility.
