The recent visit of the Indian Prime Minister Modi has reignited interest in the Indian investment story. It is one that is unique in the world as it is an emerging market story with a population of over one billion that largely speak English, are highly educated and are rapidly urbanising. Firstly a few statistics to tantalise (source Jupiter):
- 850 million people under 35
- 240 million internet users – 117 million smartphone users
- 461 million bank accounts
One of the biggest challenges of the last few years has been the roll out of biometric ID cards to the Indian population, which is now largely complete. This system brings financial inclusion to large swathes of the population that simply didn’t have it before, and as a result two million new bank accounts are being opened every week. This is important for a variety of reasons. Firstly, it enables benefits to be paid directly to the recipient. Previously benefits and subsidies (of which there are lots in India) involved a huge amount of benefit fraud as middlemen and officials took their cut. Subsidies often went to the supply side, i.e shops, petrol companies and food manufacturers, with no guarantees it would end up in the correct place. Now, with bank account and financial inclusion, the end user gets these directly. As with many emerging markets, the Indian story is one of a burgeoning middle class moving from subsistence to consumption and moving from the countryside to the cities.
I am a long term bull of Indian equities. Many of Mr Modi’s policies are beneficial to the market. Ensuring inflation stays under control is crucial (helped by low oil prices as India imports all of its oil) and that India’s bureaucratic governmental system doesn’t hinder reform. Since Mr Modi’s election there has been a lot of talk, and some action, but probably not enough yet. The early signs are encouraging but delivery is now crucial.
India was originally judged to be a member of the “fragile five”, countries that were deemed most at risk from an increase in interest rates in the US. Although that rate rise is yet to occur (possibly coming next month), India has weathered the storm far better than its fellow “fragile-ites” cialis frankreich.
The stockmarket though has had a muted year in 2015, falling 5.5% to date and can also look expensive compared to many western markets. The potential is vast however, and although it will be a very bumpy ride, long term investors with the right risk appetite should have exposure in their portfolios.
Ben Yearsley November 2015
This article represents a personal view from Ben Yearsley, and is based on his opinion of economic data from across the globe. It should not be used for investment purposes and does not constitute advice. For investment advice please refer to your financial adviser. No party should act or refrain from acting on anything contained in this material. Relevant primary materials should always be consulted at all times for all purposes. No statements or representations made in this material, document or at the presentation are legally binding on Shore Financial Planning (Plymouth) Ltd or the recipient and no liability is accepted in connection with this material. This article may not be reproduced or circulated without prior permission. Issued by Shore Financial Planning (Plymouth) Ltd, authorised and regulated in the UK by the Financial Conduct Authority.
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