liquid - india

8/8/2019 Liquid - India

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INVESTMEN

SPECIALEDITED BYRichard

WINTER 10

BUILDING BRICS:

INDIAIN THIS FOUR-PART SERIES, RICHARDWILLSHER EXAMINES THE INVESTMENT

ATTRACTIONS OF THE EMERGING BRIC

MARKETS BRAZIL, RUSSIA, INDIA AND

CHINA. IN THIS ISSUE, WE LOOK EAST

TOWARDS INDIA.

T he numbers, skills and hard work of its peoplehave driven Indias emergence as a major globaleconomic force.is looks set to continue,positioning the country as an investmentdestination with distinct attractions.While European and North Americaneconomies have struggled to achieve growth, India has beena consistently high performer over recent years. Economistsat Moodys, the rating agency, log Indias record of growthsince 2006 as falling in the range of 6.7% to 9.6% annually,with the lowest of these gures covering the period from2008 to 2009, when the western world was plunged intonancial crisis. Looking ahead, Moodys projects 8.8% GDPgrowth this year and 8.1% next year. HSBC Global AssetManagement expects growth of at least 7% of GDP over thedecade to 2020 in the Indian economy (compound annualgrowth rate the year-on-year increase over the period).

Not everything in Indias economic garden is rosy,however. For the last three years, the country has been

wrestling with government debt at around 77% of GDP.*Public sector ineciency, particularly in gathering taxes, is

Inside this section: P19 Emerging markets: Spotlight on India P22 Hard Assets: Investing in the tangibleP24 Active vs Passive investing: Which is best? P26 Structured products: Are they for you?

RICHARD WILLSHERis anance and business writer with abackground in international investmentbanking. He is the former editor ofe Investormagazine and now freelancesfor, among others, the Financial Times,and the International Herald Tribune.

BrunoModrandiGettyImages

*CIA World Factbook


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NEW GLOBAL CHALLENGERS

In this regard, the country has a rapidly increasing, aumiddle class that now numbers around 200 million; rouequal to the entire populations of Germany, France andUK added together. And these people are buyers of goodand services that are sourced or delivered from overseasas well as from the domestic market: indeed India is nowreckoned to be among the ten largest retail markets in th

world and growing fast.At the same time, the Boston Consulting Group (BCG

has pointed out in its latest New Global Challengers repthat India is home to 20 of 100 companies that are basedin rapidly developing economies but are contending forglobal leadership in theirelds of operation.ey inclurms such as United Spirits, the worlds second largest

forging business, Tata Consultancy Services (TCS), Asialargest services and business process outsourcing compand Bajaj Auto and Mahindra & Mahindra the automotequipment makers.

HOW CAN YOU SHARE IN INDIAS SUCCESS?

So the question facing investors is how to share in thegrowing prosperity of such Indian companies. HSBCsSanjiv Duggal is cautious: We believe when it comes toinvesting in India, a strict and disciplined approach is amust. Like any emerging economy, while the potential f

not helping matters. Generally, income levels among Indiasvast population are low, and inadequate physical andsocial infrastructure, as Moodys puts it, could hampereconomic development going forward.

But then, this is an emerging market. What attractsinvestors to India are its prospects for growth anddevelopment. One of the key features of India, versus otheremerging economies such as China and Russia, is the rapiddevelopment of its internal market rather than its exports:this is generating huge amounts of income for some of itsgrowing domestic businesses.

e rise of the consumer in India theres a lot ofdemand due to higher incomes and aspirations is akey driver of economic growth, explains Sanjiv Duggal,manager of the HSBC GIF Indian Equity Fund.

For example, a particular pocket of opportunity is inpassenger car sales in the nancial year endedMarch 2010, passenger car sales in India grew at their fastestpace in six years, up 25% to 1.53 million units. In addition,

the housing market is forging ahead, enjoying strongdemand due to a major shortage of quality housing, and weare continuing tond opportunities amongst the under-owned real estate sector.ere is also a strong governmentfocus on improving healthcare, education and training, andphysical infrastructure.

Sanjiv Duggal adds: Growth in per capita incomemeans that India is near the point where we canexpect consumption to take osharply.e nationsdemographics, with its young population, will also continueto bolster economic growth.

INDIA BY NUMBERS

3,287,263Worlds seventh largest countryby area (square km)

1.157bnWorlds largest democracy andsecond largest population(July 2010 estimate)

$3,560bnFifth largest Gross DomesticProduct (US$, 2009 estimate)

64%Proportion of the population inthe age group 15 to 64. 30% ofpopulation is under 14 yearsof age (2010 estimate)

$3,100Per capita GDP(US$, 2009 estimate)

8.8%Estimated GDP growth this year

All CIA World Factbook

Snapshots of India

Despite the globaleconomic downturn,

Indias economy grew by8.8% year-on-year in thesecond quarter of 2010

(as quoted in the FinancialTimes, 31 August 2010).

Thats its fastest rate ofexpansion in almost

three years.


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