The New Indian TigerIndia is the emerging world’s powerhouse. The second-largest nation on Earth and one of the most economoically potent, this nation present many unique opportunities for investors looking to put their money into the emerging markets of the world. Many are questioning how India came to surpass China as the world’s fastest-growing economy this year. India posted growth of 7.4 percent in the third quarter of 2015 compared to China’s 6.9 percent.
Consumers are buying
One of the key reasons is that, “Consumers in India are buying,” Vijaya Bhaskar, Executive Director of India’s central bank, told Canadian financial advisors on the third day of a due diligence tour hosted by Birla Sun Life and Excel Funds. “Our problem is one of supply,” he said. “The demand is there.”
Whether it’s real estate, automobiles, mobile phones or apparel, Indian consumers are spending more money, while governments in North America, Europe and China struggle to find ways to spur retail spending. The Reserve Bank of India (RBI) has cut its key lending rate three times this year, to 6.25 percent. Even though banks have passed on less than half that cut to consumers through cheaper loans, Indian’s are still spending.
“Interest rate changes have only had a marginal effect on Indian consumers, who are traditionally big savers,” Mr. Bhaskar said. “Part of the increase in spending has to do with the young demographics of the country, while other drivers include a social assistance package for rural areas and the boom effects from India’s IT centres in Bangalore, New Delhi, Chennai and Hyderabad,” he added.
Favorable legislation to increase supply
Supply shortages refer to bureaucratic red tape, underdeveloped infrastructure and a shortage of financial capital, which together slow down the rate at which businesses can operate and expand India. The government of Narendra Modi has begun to tackle the issue of bureaucratic reform and banking renewal and is opening the way for more private banks that serve the poor.
“Indian banks are due for a paradigm shift,” Mr. Bhaskar said.
RBI policies have recently been directed as improving liquidity, tightening regulations and bringing more participants into the banking sector. SKS MidroFinance, for example, which existed before the election of the Modi government, is one example of innovation in the financial sector. The non-banking finance company makes loans to women in rural India who have some kind of economic assets, be it a goat or sewing equipment. The company conducts 800,000 transactions a day, providing loans of US$250 on average, which the women invest in their business idea, trying to make enough money to pull their families out of poverty. SKS boasts 3.8 million borrowers today.
For those looking to get involved in this booming marketing, and to help India tackle its supply problems, our Excel India Fund is the perfect investment vehicle to put your money to use. Investors looking to put money into the emerging world rely on Excel Funds for our authority in this area of the world. Emerging markets require expert knowledge. Trust only the experts.
Photo of the Reserve Bank of India in Mumbai