It’s been a little over a year since Prime Minister Narendra Modi took office in India and the results have been mostly positive for this South Asian country and the surrounding region. Among other achievements, Modi’s government has managed to enact important policy reforms, increase public investments in infrastructure, lower food inflation and generally open up India on a global scale.
Credit Lyonnais Securities Asia’s chief equity strategist, Christopher Wood, gives the country accolades in his most recent newsletter. Wood writes that while “the halo effect has come off the Modi phenomenon” somewhat, India nonetheless remains “the most promising major emerging market story on a five- to 10-year view globally,” Frank Holmes wrote for InfoMine.
With the government taking steps to improve ease of doing business and attracting investments, FDI inflows into the services sector grew by over 46 percent to $3.25 billion in 2014-15.
Looking ahead, analysts forecast that India’s economy will expand between 7.5 percent and 8.5 percent for the 2015 and 2016 fiscal years, faster than any other G20 nation, including China.
This growth can be sustained for the long-term. According to the International Monetary Fund, within the next decade and a half, “India will have the largest, and among the youngest, workforces in the world, and will need to create jobs for the roughly 100 million young Indians who will enter the job market in the coming decade.”
By 2050, India is expected to be the world’s second-largest economy based on purchasing power parity, following China.
Global investors recognize these positive data points and are piling into Indian equities, especially now that aggressive monetary easing in the country seems likely. Wood points out that $737 million a month on average have flowed into India-focused mutual funds since Modi took office last May, a dramatic reversal from the amounts seen prior to that.
