As India is likely to become the third-largest economy within a decade, it makes it difficult for investors to ignore the nation when building a global equity portfolio, according to ETF Securities.
ETF Securities head of distribution, Kanish Chugh, said COVID-19 cases peaked in the country in September and there were now signs of economic recovery seen in indicators such as industrial output and energy consumption.
Chugh said India would soon overtake China as the more populous nation and its economic future was dominated by three key growth drivers.
The first driver was infrastructure as the Indian government had committed US$1.4 trillion ($1.8 trillion) in infrastructure investment with roads, railways, power distribution, renewable energy generation, water, sanitation and gas pipelines.
“Reform and fiscal policies are also driving India’s growth agenda. The introduction of a GST in 2017 which centralised and simplified indirect taxes and a raft of corporate reforms have made business operation and regulation simpler and more transparent. At the same time, a focus of fiscal stimulus has been poverty reduction programs,” Chugh said.
“The third major driver of economic growth is consumption, with India set to benefit from a rapidly expanding middle-class. While foreign companies have an opportunity to access this trend, domestic based companies have cultural and physical base advantages in reaching this audience.”
Chugh noted it would be difficult for Australian-based investors to directly access the Indian market for listed shares but they could consider Australian Securities Exchange (ASX) listed companies with substantial operations in India or managed funds with an Indian or Asian focus.