by some literature lately about the growth prospects of India, perceptibly creating a buzz around the BRICS Summit in Durban this week (2627 March). A quick survey of the BRICS reveals that China stands out a star. Sure, China is one indeed, but you’re missing out on befriending a rising star.
Let’s paint a quick picture. According to the World Bank estimates, India has to invest about $1.7tr to upgrade its infrastructure over the next ten years, the entire African continent needs about $950bn over the same period. The country has a savings rate of about 30% with a literacy rate of 74%, an estimated 2012 GDP growth of 5.4%, lower than China’s 7.8% but higher than that of its other its BRICS brothers. And, more than 50m Indians have a annual disposable income of between $4 000 and $20 000, and this is expected to grow as the country matures.
So I chatted to Investment Solutions Strategist Chris Hart for a lowdown on the country and he says the highly populous nation of 1.2bn people is just starting out. He suspects that China’s super growth era, as it is a bubble economy, may be coming to an end.
He points out that advantages such as a young population, cost advantages as a result of the pool of skills the country has, the shrinking dependency ratio leading to further disposable income as well as the massive informal sector posed for formalisation in the coming years are some of the attractive qualities this country boasts.
In addition, infrastructure development and manufacturing production are definitely growth areas for India, and are very high return sectors. UK car manufacturer, Jaguar Range Rover, now owned by India’s Tata Motors, has recently announced that it is considering manufac- turing its cars in India, from scratch.
But how do we cash in on the 5 600 listed shares, though concentrated on the top 5, such as Tata, Reliance and others? Not so easy, it seems. India is notorious, though to a lesser extent now, for its protectionism where certain sectors are concerned. For example, its retail sector was only recently opened to foreign investors.
A search for any local India- specific ETF platforms did not yield positive results. China, for example, has the Deutsche Bank MSCI China TR Index ETN, which has holdings in China Mobile, China Construction Bank, ICBC and Tencent, to name but a few.
However, Hart advises that going passive on India may not be the best strategy. He says India’s stock market is not reflective of the country’s broad growth and therefore would advocate for an actively managed mandate.
If this arouses your curiosity, perhaps look at the Old Mutual Global Emerging Market Fund, which allocates about 11% to India, with a fund size of R1bn or the Momentum Emerging Markets Fund, with a 3.2% allocation in a $105m fund.
INDIA’S HOT FACTS New Delhi $1.85tr in 2011 according to the World Bank 1 210 193 422 (623.7m males and 586.4m females) on 1 March 2011 65.8 years (males); 68.1 years (females) in the period 2006-2011 Provisional results of 2011 census, the literacy rate in the Country stands at just over 74% - around 82% for males and just over 65% for females. Coal, iron ore, manganese ore, mica, bauxite, petroleum, titanium ore, natural gas, magnesite, limestone, arable land, dolomite, gypsum, apatite, phosphorite, fluorite, to name a few. 3.3m sq km