India imports set to outpace China
India’s growth story is more positive than most emerging markets, according to Fiducian investment manager Conrad Burge.
“The only really good stories at the moment are India and China,” he said. “Obviously China is more important because it has become the second largest economy in the world and it’s having a huge effect on exports for the rest of the world.”
Burge said China’s imports were growing by 25 per cent per annum, but noted that India’s imports were also growing by 25 per cent per year — and at a faster rate.
“That is also providing a huge boost to the rest of the world, including places like Europe and Japan,” he said.
Burge said the big boost to the Indian economy was provided by remittances from Indians working abroad. “There are huge numbers of Indians working in the US, Canada, the UK and Australia, and they are sending back massive amounts of money that is underpinning economic growth in India,” he said. “It’s also helping Indians to import more.”
Another boost to the economy is the population growth of an additional 20 million people every year.
Burge said that one of the advantages India had over China was that it was an open investment market.
“The good thing about India is that it has a well-founded system of law and you can invest straight into Indian stocks, whereas in China it’s quite difficult for foreigners to invest,” he said.
While the price to earnings ratio is higher compared to Australia, Burge noted that growth in India was expected to be 9 per cent over the next two years.
“Being a developing economy, it’s a little bit unpredictable in terms of where it is going to go,” he said. “I don’t think it’s any different from any other emerging market, except that the outlook is more positive for India. From a political front, the Indians are showing a degree of sophistication that perhaps wasn’t expected.”
He said the last election revealed a preference for a government that was keen on free enterprise and implementing policy that would support development.
Fiducian’s India Fund recently received an upgraded ‘recommended’ rating from Lonsec, and while it underperformed its BSE100 benchmark by 6.2 per cent, the fund returned 56 per cent for the year to March 2010 — a “very strong absolute return,” according to Lonsec.
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