– Walt Whitman's “Passage to India”
India presents a compelling case for inclusion in any investor's global portfolio. As the world's most populous country and one of its fastest-growing major economies, India offers unique opportunities for long-term growth. The nation boasts a young, increasingly educated workforce, a burgeoning middle class, and a rapidly digitalizing economy.
While it may seem geographically and culturally distant to some Western investors, India's financial markets are increasingly accessible, and its business practices are aligning more closely with global standards.
The country's diverse economic sectors, from traditional industries to cutting-edge technology, provide a wide range of investment options. Despite challenges such as regulatory complexities and infrastructure needs, India's economic potential and ongoing reforms make it an increasingly attractive destination for international capital.
India's trajectory suggests it could be a key player in the global economy of the future – making it a market that forward-thinking investors should seriously consider.
As with any emerging market, risks exist, but India's trajectory suggests it could be a key player in the global economy of the future – making it a market that forward-thinking investors should seriously consider.
1. Economy
Leading global growth. India has an impressive economic track record, underpinned by an already large and growing population with rising disposable income. Real gross domestic product (GDP) growth averaged 8.3% in the past three years (FY2021–23) and is forecast to average 6.7% in the next three years (2024–26) – well ahead of all other major global economies, including China.1,2
At the same time, economic stability is supported by low external debt, which has been declining relative to the size of GDP, and sizeable foreign exchange reserves, which have more than doubled over the past decade.
2. Reforms
Positive policy directionality. Over the past decade, the Indian government implemented several painful but necessary reforms to stabilize the economy and reduce the cost of doing business. Despite Modi now governing in a coalition as a result of the recent elections, we believe the economic policies should remain pro-business and investor-friendly due to political continuity.
3. Geopolitics
Capitalizing on global supply chain diversification. Geopolitically, India looks well placed to benefit from increasing US-China rivalry, which will likely increase US-India alignment and cooperation in multiple spheres. India can also capitalize on global companies’ growing efforts to reduce supply chain reliance on China.
4. Energy transition industries
Powering cleaner growth. India is actively seeking to power its growth through cleaner energy sources. Globally, it already has the fourth-largest wind and fifth-largest solar capacity. However, there is an ambitious target of adding 500 GW of installed renewable capacity by 2030 while cutting carbon intensity by 45% over the same time.3 Achieving this will require huge capital outlays and the creation of sizeable investment opportunities, too.
5. Digitalization
Driving efficiency and growth. Arguably, the single most standout area of policy-driven progress and source of growth enablement in India has been the rapid expansion of digital infrastructure. Built on the formidable Aadhar National Biometric ID System, increasing digitalization delivers notable productivity gains and many exciting business opportunities.4
Final thoughts
India's vast population, growing consumer base, and technological advancements offer an opportunity for long-term value creation. As the country integrates with the global economy and implements business-friendly reforms, it will play an increasingly significant role in shaping international trade and finance. Understanding India's complexities and strategic positioning within its markets may capitalize on its dynamic economic potential, making it essential for a globally-oriented investment portfolio seeking emerging market growth.
1 Ministry of Statistics and Programme Implementation, India, June 2024.
2 "The Global Economy in a Sticky Spot." World Economic Outlook Update. International Monetary Fund, July 2024. https://www.imf.org/en/Publications/WEO/Issues/2024/07/16/world-economic-outlook-update-july-2024.
3 "Creating a Sustainable World." Renewable Energy. Invest India, August 2024. https://www.investindia.gov.in/sector/renewable-energy.
4 "India Has Been Collecting Eye Scans and Fingerprint Records From Every Citizen. Here’s What to Know." TIME, September 2018. https://time.com/5409604/india-aadhaar-supreme-court/.
Important information
Projections are offered as opinion and are not reflective of potential performance. Projections are not guaranteed and actual events or results may differ materially.
Foreign securities are more volatile, harder to price and less liquid than U.S. securities. They are subject to different accounting and regulatory standards, and political and economic risks. These risks are enhanced in emerging markets countries.
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