A recent visit to India confirmed that the country is in a good place; the economy is strong, concrete is being poured and sentiment is generally upbeat. As we all know, this is not news. However, after 30 company meetings, where themes often recur, what interested us was something else. It occurred to us that India might be following China’s exponential growth trajectory. Let us explain why.
- Our fourth visit to India in 18 months confirmed that its growth is solid and sustainable.
- India has successfully been on a mission to build its soft infrastructure. An instrumental part of this has been the introduction of the Aadhaar identification system, which has empowered 1.4 billion citizens.
- Other endeavours have included increasing financial inclusion through the Unified Payments Interface; bolstering economic growth via a regulated real estate sector; driving economic resolutions through a reformed Insolvency and Bankruptcy Code; streamlining indirect taxes through a national goods and services tax; and privatising the banking industry.
- The booming private equity industry is also attracting dynamic Indian professionals back to India.
- India is also developing an ability to deliver ‘hard’ infrastructure projects as well. For example, highway construction which averaged 28km/day in 2019/20, is targeted to reach 45km/day in 2023/24.
- The biggest risk is that the foundation of economic growth and market confidence is built on the Modi administration.
- We believe India is a rich territory for our brand of bottom-up stock picking.
In this note, we go into further detail on the above and share how our 4Factor Emerging Market Equity portfolios are well positioned to benefit this dynamic and sustainable growth.
General risks. All investments carry the risk of capital loss. The value of investments, and any income generated from them, can fall as well as rise and will be affected by changes in interest rates, currency fluctuations, general market conditions and other political, social and economic developments, as well as by specific matters relating to the assets in which the investment strategy invests. If any currency differs from the investor’s home currency, returns may increase or decrease as a result of currency fluctuations. Past performance is not a reliable indicator of future results. Environmental, social or governance related risk events or factors, if they occur, could cause a negative impact on the value of investments.
