It seems to me that, with all of the focus on China, India is being largely ignored in Australia, both from a business and investment point of view. I believe this is a mistake because India deserves at least the same coverage as China, certainly from an investment point of view, if not more. Here are at least eight reasons why India is a seriously compelling story for investors:
1. Size of India
India's GDP is currently US$1.3 trillion, making it the eighth largest economy in the world. However, in PPP terms, which recognises India's low cost base, the GDP notionally rises to three times this amount (US$3.8 trillion) which places it on a similar size to Japan and, by 2013, it will become the third largest economy in the world (after the USA and China) in PPP terms. However, despite representing 7.5 percent of Global GDP (on a PPP basis) in 2010, India attracts less than 0.5 percent of investment inflows. An anomaly which is unlikely to continue for much longer!
2. Economic growth
India's economy is currently growing by 8.75 percent per annum (in 2010) and this GDP growth rate is expected to increase to 9-10 percent per annum for each of the next 10 years. India's GDP will grow five times in the next 20 years, and GDP per capita will almost quadruple.
The Indian economy offers investors exposure to a wide range of opportunities from consumer goods and pharmaceuticals to infrastructure, energy and agriculture. With its strong services sector (comprising 50 percent of India's economy), particularly in knowledge-based services (IT, software and business services) India has proved that industrialisation and the export of commodities and resources is not the only path to rapid economic development.
India is one of the youngest countries in the world, with an average age of 25 and likely to get younger. India's working-age population will increase by 240 million over the next 20 years. With a population of 1.2 billion, a strong work ethic, high levels of education, democracy, English language skills and an entrepreneurial culture, India is poised to dominate the global economy in the next 20 years.
5. High Savings
With a savings rate of 37 percent of GDP, India's domestic savings fuels most of its investment requirements, and only 20 percent of India's total public debt is sourced from foreign borrowing. With significant investment to be made in upgrading India's poor infrastructure in the next 10 years (estimated to be US$1.7 trillion) India's government is taking various steps to further encourage private and foreign investments.
6. Domestic economy
India's domestic consumption, generally led by the private sector, has played a significant role in India's growth and is expected to remain firm as more people enter the workforce and the emerging middle classes. India's wealthiest consumers (those earning US$1 million or more in PPP terms) will increase by 40 million in the next 10 years! Every sector within India's consumer market is booming, making India far less vulnerable to external shocks and pressures than other emerging markets.
7. Robust financial sector
India has a robust, diversified and well regulated financial system which has allowed it to weather the global financial crisis without any major difficulties and present an image of quality, resilience and transparency. India's banking sector is strong, with top quality balance sheets, high levels of competition (there are around 80 banks in India) and strong corporate governance.
8. Quality of Investment Markets
The Bombay Stock Exchange is the second oldest in the world (165 years) and offers investors a low cost, highly efficient, modern and well governed environment in which to prosper from India's extraordinary economic growth. The Indian stockmarket has generated investment returns of over 15 percent per annum for the last 10 years and experts expect this rate to increase in the next decade. More significantly perhaps, Indian investors have doubled their money over the last three years at a time when many have lost money in almost every other market. Don't take my word for it: talk to investment professionals and advisers who can offer you objective and independent forward-thinking advice. But don't wait another 10 years to find that India offered a compelling investment story, or you might be too late! I am grateful to Bharat Shah and my friends at ASK Investment Managers for their assistance with some of the points made above, and hope that ASK and other Indian specialists will continue to promote Indian investment opportunities in Australia. -David Thomas is CEO of Think Global