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Published On: Fri, May 4th, 2018

What Should Investors Know About India and Its Economy Right Now?

India is the second most populous country in the world, and it’s behind only China in terms of being a leading emerging market. There’s always a lot of news out of India, and much of it is relevant to investors in the U.S.

There’s a reason so many companies are interested in being in India and providing goods and services to the people who live there.

From money transfer services like Remitly to the potential purchase of the Flipkart company by Amazon, U.S. companies see the opportunity to be part of what’s happening in India. With the Flipkart deal, which is a massive Indian e-commerce retailer, Amazon has made an official offer for a 60 percent stake.

The following are some key pieces of news and information out of India right now that can help investors who’d like to know more about the emerging market, particularly as they’re working on investment strategies.

photo/Gerd Altmann

Economic Growth

The economy of India is known primarily for information technology, and for industries that allow businesses in other countries (mostly the U.S.) to outsource their processes. The country is also second in the world regarding farm output and 12th in the world for factory output. As a result, India is the third largest economy in the world when comparing a measure called purchasing power parity or PPP.

The workforce in India is growing incredibly fast as well. The U.S. estimates it will be the largest workforce in the world by 2025 and half the population is under the age of 25. More than 65 percent of the population is under 35, which can be astounding particularly when you look at the effects of the aging U.S. population.

There’s a growing middle class in India that’s catching the eye of many investors, and many global companies like Samsung and Unilever have made their way into the country in a significant way to take advantage of the opportunities.  

A report from BMI research recently indicated the economic growth in India could rise to 7.3 percent in for this year and next, and leading areas of performance could include manufacturing, construction, and the service sectors.

Why Do People Invest In India?

An individual may have a different perspective of the financial and even the societal news coming out of India as compared to a corporate investor, but there are general benefits to investing in the area across the board.

The demographics of the country are a big reason investors tend to look to India. A young and educated workforce is a good indicator of the country moving forward positively. There’s also the economic growth, and there is a pretty good sense of stability in terms of the government of the country, which is a parliamentary democracy.

There’s also been a big focus in India recently on infrastructure spending. The country is putting money into everything from airports to roads and bridges, and India has also been investing in solar energy generation.

Of course, no investment is without risk, nor is any emerging market. One of the biggest risks news outlets and professional analysts cite when it comes to investing in India is the sense of what’s called geopolitical instability. This refers to some of the terrorist attacks in particular that have been happening in the area.

ETFs

If you’re an individual investor, you might not even have a real understanding of how to invest in the country. There are only a few companies that are traded on U.S. exchanges, so for individual investors, ETFs can be a good option, and they’re cost-effective.

The India Fund, WisdomTree Earnings, and iShares India 50 are three of the primary options. The iShares India 50 ETF is an across-the-board generalized ETF that has stocks in most industries. The fund includes assets invested in software, consumer finance, and energy companies, as well as some other holdings such as pharmaceutical stocks.

WisdomTree is invested primarily in large-cap stocks, but there is also exposure to mid-cap and small-cap. WisdomTree is focused more on making investors money right away, with energy, banks, and software all being pretty equally weighted in the fund.

The India Fund has been around the longest, and it’s focused largely on consumer goods, but there’s also exposure across industries.

If you are interested in investing in India in any capacity, it’s a good idea to follow the news coming out of the country. A lot is happening there, and a lot of opportunities, but things also change quickly.

Author: Carmelo Hannity

About the Author

- Outside contributors to the Dispatch are always welcome to offer their unique voices, contradictory opinions or presentation of information not included on the site.

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