Could today’s India outshine yesterday’s China?
By Kristen McGachey, 17 Aug 17
Though it might be tempting to view today’s India as yesterday’s China, Rathbones’ head of asset allocation Ed Smith thinks the region’s growth prospects could be even greater based on five key indicators.
“India isn’t the most open of economies when it comes to foreign investment, but neither was China in 2000, and yet inward foreign direct investment increased from $40bn to $250bn a year by 2015,” Smith noted.
And external foreign investment does not look like it will be falling away anytime soon.
Last year, major global brands like Apple, Coca-Cola, Softbank and Amazon committed capital, spanning hundreds of millions to billions (in USD) to a variety of projects in the region. This reflected an increasing, palpable demand among heavyweight players, scared of missing out on a piece of the action.
“How many investors kick themselves for failing to appreciate China’s potential early enough?” asked Smith.
“Similarly, China went from making no investment abroad to making nearly $200bn a year – if India does the same that could mean significant M&A to spur Western markets,” he added.
Data from the Reserve Bank of India puts outward foreign direct investment at around $1.12bn for June 2017.
While this is comparatively lower than its outward investment of nearly $2.1bn in June 2016, India’s outbound investments totalled $11.20bn for the first six months of the year.
An effective combination of domestic and foreign investment could enable India’s productivity to break out, as China’s did in at the turn of the 21st century, Smith said.
