It’s never as bad as it looks…India’s fundamentals still leave Western Economies in the shade
Every year more than 12 Million Indians join the subcontinent’s workforce: that’s equivalent to a country the size of the United Kingdom being added every five and a half years, and the brightest and best of this new generation are quite literally building India’s future as the fastest-growing large economy on the planet. So with demographics like that, it’s surprising some commentators still anguish GDP growth in India is only 6%: as opposed to the UK’s 1.2% and the 2.4% currently being returned by the United States.
The real question isn’t why Indian growth has slowed marginally over recent months: it’s why the global economy has faltered so severely this year and you don’t need to look much further for the answer than President Trump’s senseless trade war with China, the contagion that is Brexit and a continuing failure of governments across the planet to address unsustainable levels of credit level. These factors are bound to have an impact, even on countries with such strong fundamentals as India but it remains the case that as the rest of the world stumbles, India still leaves almost every developed economy in the shade.
And that’s in no small part due to the resilience of those all-important fundamentals, built of radical government policies such as Prime Minister Modi’s Demonetisation Programme in 2017 which overnight removed no less than 86% of the subcontinent’s circulating currency in a largely successful effort to contain and cut back on its historically debilitating black money sector. Add to that the new unified tax system (GST) designed to facilitate transnational trading in place of a previously chaotic system of bureaucratic red tape at State borders that could hold up consignments for months. India’s Real Estate sector has also changed beyond recognition…and, of course, underpinning it all are those millions of young Indians, with more money o spend than ever before, more to spend it on and ambitions as boundless as the subcontinent’s skies. India’s economy is projected to grow to an eye-watering $5 Trillion within the next four years.
So don’t listen to the myopics who might tell you Indian business is unnerved by a lack of economic cohesion. That’s like saying Cristiano Ronaldo would be unnerved by someone hiding his football boots: he won’t be. Ambition and ability are undiminished by such daily trappings because at the end of the day it’s still the fundamentals that count.
Prime Minister Modi’s Government has just announced a cut of $20 Billion in corporate tax rates, which is another key element of those fundamentals: certain to make India an even more attractive destination for its already thriving Foreign Direct Investment sector.
And if you’re still looking for evidence, why not listen to those who are at the heart of India’s markets? Chief executive of Nit Aayog, Amitabh Kent, went on record last month to record his admiration for the Government’s “commitment to a high trajectory growth path” and on a more prosaic note Uday Kotak, billionaire banker and managing director of Kotak Mahindra Bank quipped that although “In India, things may not be quite as good as they can get, they’re never as bad as they look”.
Some of those jaded commentators might care to take a leaf out of his book.
Nobody understands the fundamentals of the Indian economy better than Red Ribbon Asset Management, which has placed the subcontinent at the heart of its investment strategies since the company was founded more than a decade ago. Drawing on unrivalled knowledge of local markets with an expert team of more than a hundred advisers working in India’s economic hotspots, the Red Ribbon Private Equity Fund offers unique opportunities to share in this potential.
I’m unsure whether a few economic commentators have forgotten where to find their happy pills recently, but when it comes to India some of the articles I’ve read in recent months have been almost perversely gloomy. Perhaps they’re simply tired of chewing on the same old Brexit gristle.
Whatever the reason, facts still speak louder than fiction. The subcontinent currently has GDP growth more than three times that of the United Kingdom and twice the United States. It is still the fastest-growing large economy in the world and its rapidly burgeoning and increasingly middle-class population is still fuelling an unprecedented consumer boom. As the article says, it's the fundamentals that matter…
These are exciting times, creating unrivalled investment opportunities and I for one can’t wait to see what happens next.