It's set to eclipse UK economy: Can you afford NOT to invest in India? (2022)

Some 20 years ago, the acronym Bric came into being. The creation of Jim O'Neill, the chief economist of investment bank Goldman Sachs, it acknowledged that the engines driving world economic growth were shifting location – away from the developed economies of the West to emerging power bases.

Most notably, the countries of Brazil, Russia, India and China (Bric).

It's an acronym that has stood the test of time (although Bric has now become Brics with South Africa joining the drivers of that growth).

Vibrant: India, home of Bollywood movies, has a bright future with 'stunning' investment prospects, say experts

Last week, Brics leaders held their annual meeting in Beijing, China. It has also spawned the rapid development of a new exciting investment opportunity: namely, making money from investing in the stock markets of some of the world's fastest growing economies (not necessarily just Bric economies).

Hundreds of funds and stock market-listed trusts now invest in the world's emerging economies while some investment groups such as Ashmore specialise in such markets.

For most investors, emerging markets haven't quite delivered the stellar returns they expected. Rapid growth economies haven't escaped the impact of major crises such as the 2008 financial crash and of course, more recently, the Covid pandemic.

They have also had their own financial issues to contend with – for example, sliding currencies and huge debt burdens.

As a result, over the past five years, the average emerging markets fund has generated a return less than an investor would have got from investing in the stock markets of the UK, Europe and the world.

But the fact remains that the thesis behind Bric remains largely intact – that a new world order is under way that will see the globe's economic might continue to shift inexorably East.

It's a point made in an excellent new book, The World In 2050: How To Think About The Future, by economics journalist and Mail on Sunday City columnist Hamish McRae.

Drawing on research by economists at HSBCBank, McRae believes that by around 2030, China will become the world's largest economy, surpassing that of the United States, and will remain so for the next 20 years and beyond.

India's economy, driven forward by a young and growing population, will surpass the size of the UK economy in the early 2020s and by 2050 will be the world's third largest economy. Brazil and Russia will be ranked 8th and 13th respectively.

On India, McRae highlights the 'many gifts' that will drive it forward – for example, a huge supply of skilled young people 'pouring' into technology-heavy industries and its great strength in both service industries and manufacturing.

Although he acknowledges the challenges that India faces in ensuring the country's growth is for the good of the entire population, and not just for the burgeoning middle class, McRae says 'stunning opportunities' abound.

Not surprisingly, for many professional fund managers, it is now India – not China – that represents one of the world's most exciting long-term investment opportunities. Not just as a result of the country's expected rapid economicgrowth over the next 30 years, but because India is the world's biggest democracy.

In investment terms, this means that its stock market, and the businesses that are listed on it, are not at the mercy of state interference as has happened recently in China. Investing in India is an unencumbered financial bet on the country's future.

WHAT FUND MANAGERS SAY ABOUT INDIA

Although leading emerging markets fund managers are reluctant to look 28 years into the future as McRae has done, they acknowledge that India is currently in economic growth mode (seven per cent per annum) – and that such growth should power higher company profits and drive the stock market forward.

Their positivity is reflected in the exposure their funds have to India. Investment trust Mobius was launched in late 2018 to find investment opportunities in some of the world's fastest growing economies. It currently has 16 per cent of assets in Indian companies – only Taiwan isa bigger country position, while it has 10 per cent exposure to China.

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Although the portfolio is managed day-to-day by Carlos Hardenberg, it benefits from the input of octogenarian Mark Mobius, who is considered by many as the 'godfather' of emerging markets.

Thirty five years ago, Mobius started running the world's first emerging markets fund, Templeton Emerging Markets, and managed it successfully for more than three decades.

Last week, Mobius said India was 'emerging as something very exciting'.

It is heartening to visit countries like Brazil and India and see that economic growth very much remains the reality

Carlos Hardenberg, Mobius

It's a view shared by Hardenberg. Speaking from Sao Paulo in Brazil, he told us: 'In a world which understandably is focused on the negatives – the fear of rampant inflation, the cost-of-living crisis, China and Covid, and events in Ukraine – it isheartening to visit countries like Brazil and India and see that economic growth very much remains the reality.'

Hardenberg acknowledges that India's economy is not immune from the negative impact of higher oil prices (it's a big importer of oil) and inflation more generally. Indeed, research issued last week by the investment arm of Bank of America warned of India facing 'macro headwinds' caused by a global recession.

Yet Hardenberg is in no doubt that India will become the world's economic powerhouse as a result of a raft of reforms introduced by Prime Minister Narendra Modi.

'India is looking really good,' he says. 'It is led by a pro-business government. Modi has stripped away layers of bureaucracy that previously made doing business in India a nightmare.It's embarked on ambitious digitalisation programmes and helped ensure the population has widespread access to banking.'

The government's support of business, says Hardenberg, has triggered an abundance of capital available to support new start-up businesses and companies that want to expand.

'Our job as fund managers is to find new investment opportunities – and we see them in India, in areas such as tech and IT, where it is a global leader.'

Ewan Thompson, an emerging markets fund manager at asset manager Liontrust, is also enthused. India is the biggest country position in Liontrust Emerging Markets at 23 per cent.

'When you compare China and India from an investment point of view, India is the clear winner,' he says.

'Demographically, a third of the country's 1.4billion population is under the age of 20 – half under the age of 30. That provides a runway for economic growth.

In contrast, China's population is ageing as a result of the one-child per family rule that was in place up until six years ago. That will stymie growth.'On top of this, says Thompson, is anIndian government so intent on supporting 'free enterprise that it makes Margaret Thatcher's backing of small businesses in the early 1990s modest by comparison.'

Furthermore, the Chinese state is increasingly restricting the ability of leading companies – operating in areas such as educational support and the internet – to go about their day-to-day businesses. 'Disorderly capitalism,' the state has said, will no longer be tolerated.

He adds: 'In India, there is a sense of unbridled optimism. Companies are extremely positive about Modi and everyone is in growth mode.'

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Thompson, who also runs the Liontrust India fund, says his modus operandi as a fund manager is to identify emerging market 'leaders' – companies that are leading the way in their respective sectors.

Two Indian businesses that wear this cap comfortably, he says, are bank ICICI (it also has a successful UK operation) and conglomerate Reliance Industries, which is a leader in the manufacturing of solar panels.

From an investment point of view, there are short-term challenges, but I'm optimistic in the medium to long term

Charles Jillings, Utilico Emerging Markets

The country's commitment to green energy excites Charles Jillings, manager of investment trust Utilico Emerging Markets. Like Hardenberg and Thompson, he welcomes the 'quiet economic revolution' that Modi has overseen.

'Before Modi, India was a dysfunctional economy and heavily based on agriculture,' he says. 'Now, the mix of tax reforms and cuts that he has introduced are feeding through to economic growth. From an investment point of view, there are short-term challenges, but I'm optimistic in the medium to long term.'

Jillings' current focus is on companies involved in improving India's energy infrastructure – whether it is through building solar energy farms (Power Grid Corporation of India) or extending and improving the transmission network (India Grid Trust). 'The government understands that energy security is key to delivering economic growth,' he says.

HOW TO INVEST IN INDIA WITHOUT TOO MUCH RISK

All the investment experts agree that the economic case for investing in India is compelling: a young workforce, a growing middle class with money to spend and growing corporate profits.

And the stock market performance numbers look good. For example, the MSCI India Index, comprising 85 per cent of all listed Indian companies, posted a positive return of nearly 9 per cent in the year to the end of May. This compares with a 14 per cent fall in the broader MSCI Emerging Markets Index.

Like all emerging markets, the Indian stock market is volatile

But it's not without risk. Like all emerging markets, the Indian stock market is volatile. While the MSCI India Index has delivered investors average annual returns of 13 per cent over the past ten years, there have been years of near market carnage. In 2008, for example, the index fell by more than 56 per cent as the country was caught up in the global financial crisis.

'Investors do need to take a long-term view,' cautions Laith Khalaf, head of investment analysis atwealth manager AJ Bell. 'They must buckle up for a bumpy ride because this is a risky area of the world. When investor sentiment is poor, money tends to flow out of the market pretty quickly, which can lead to sliding share prices.'

Like other experts, Khalaf believes that a more pragmatic approach is to invest in a broader Asia Pacific or emerging markets fund with exposure to India. For example, the Asia Pacific Leaders Sustainability fund, managed by Stewart Investors, has almost half of its assets in India, while Fidelity Asia has 20 per cent. Over the past five years, they have generated returns of 36 and 28 per cent.

Investment trust Pacific Assets is liked by both Dzmitry Lipski, of wealth platform Interactive Investor, and Jason Hollands, of wealth manager Evelyn Partners. It has delivered five-year returns of 24 per cent and has 46 per cent exposure to India. Hollands also likes Aubrey Global Emerging Market Opportunities, with five-year returns of 38 per cent and more than a third of its assets in India.

There are 25 Indian funds or investment trusts run by some big investment brands such as Fidelity, Jupiter, JP Morgan and Liontrust.

The only adviser brave enough to put forward Indian fund recommendations is Hollands: investment trust Ashoka India and Goldman Sachs India Equity Portfolio.

One final bit of advice. Only invest for the long term (think more 2050 than 2030) and invest on a regular basis, preferably through a pension or Isa.

(Video) Why Should India Not Be Pragmatic About Its Policy On The Ukraine Crisis? | Arnab LIVE

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Although leading emerging markets fund managers are reluctant to look 28 years into the future as McRae has done, they acknowledge that India is currently in economic growth mode (seven per cent per annum) – and that such growth should power higher company profits and drive the stock market forward.. Thirty five years ago, Mobius started running the world’s first emerging markets fund, Templeton Emerging Markets, and managed it successfully for more than three decades.. It’s a view shared by Hardenberg.. The government’s support of business, says Hardenberg, has triggered an abundance of capital available to support new start-up businesses and companies that want to expand.. Ewan Thompson, an emerging markets fund manager at asset manager Liontrust, is also enthused.. India is the biggest country position in Liontrust Emerging Markets at 23 per cent.

It has also spawned the rapid development of a new exciting investment opportunity: namely, making money from investing in the stock markets of some of the world's fastest growing economies (not necessarily just Bric economies).. As a result, over the past five years, the average emerging markets fund has generated a return less than an investor would have got from investing in the stock markets of the UK, Europe and the world.. Although leading emerging markets fund managers are reluctant to look 28 years into the future as McRae has done, they acknowledge that India is currently in economic growth mode (seven per cent per annum) – and that such growth should power higher company profits and drive the stock market forward.. Thirty five years ago, Mobius started running the world's first emerging markets fund, Templeton Emerging Markets, and managed it successfully for more than three decades.. It's a view shared by Hardenberg.. 'Our job as fund managers is to find new investment opportunities – and we see them in India, in areas such as tech and IT, where it is a global leader.'. India is the biggest country position in Liontrust Emerging Markets at 23 per cent.. 'The government understands that energy security is key to delivering economic growth,' he says.

British business wants to invest in low-emission equipment, but limited product range and financing options coupled with too few tax breaks, stand in the way. These are the key findings of a research report into UK companies’ environmental attitudes and their investment in low-emission technology and equipment, commissioned by Siemens Fi-nancial Services.. Equipment manufacturers are also encouraged to extend their ”green” product ranges; and vendors are encouraged to make equipment finance more easily available, so that upgrading to more environmentally-friendly equipment does not mean the buyer has to absorb a major (and often unaffordable) capital outlay.. Commenting on the report, Rod Tonna-Barthet, Director, Siemens Financial Services, explains, “This independently conducted research amongst British businesses provides a really encouraging picture, but also reveals some serious barriers to a significant in-crease in low-emission equipment investment.. Earlier this year, the UK Social Investment Forum (UKSIF), with the assistance of the Carbon Trust, the Finance and Leasing Association and leading asset finance companies, produced the report ‘Green Opportunity: Accelerating the Financing of Low Carbon Assets’.. That highlighted the key role of asset finance in enabling British businesses to invest in low carbon busi-ness equipment.”. However, a significant minority of firms (26%) also now measure their overall carbon footprint 41% of British firms have implemented carbon emission reduction rules in their organisation, and 37% have invested in low carbon/energy-efficient business equipment For investment in low carbon/energy-efficient equipment to grow, 57% of firms say that the running costs must be the same or lower than standard equipment Higher costs, lack of a clear return-on-investment (ROI) and limited product range are seen as the principal obstacles to growth in low carbon/energy-efficient equip-ment investment growth A quarter of British businesses say they simply do not have the capital to replace existing equipment with environmentally friendly alternatives Competitive pricing, greater availability of integrated financing options, and more widely applicable tax incentives are seen as critical to encouraging greater investment in environmentally friendly business equipment. About UKSIF The UK Social Investment Forum (UKSIF) is the membership network for sustainable and responsible financial services.. About Siemens Financial Services Limited Siemens Financial Services is a leading provider of innovative finance solutions to UK businesses and public sector organisations.. The business provides solutions ranging from £1,000 to many millions for a diverse range of financing needs, including equipment and asset finance, treasury services and working capital finance.. Amongst its many accolades Digital Networks Limited (DNL), a supplier of marketing and online services to the asset finance industry, published research highlighting the business as the leading provider of as-set finance to the public sector.

Rebecca O’Connor on the temptation of foreign property for those priced out of the UK market. First-time buyers are being targeted by a growing band of property experts who claim that anyone priced off the ladder in the UK should consider buying cheaper houses abroad, in locations such as Poland, Turkey or even India.. A new website, www.from55k.co.uk, from Parador Properties, one of the biggest British-owned property companies in Spain, promises aspiring homeowners the chance to buy a new two-bedroom apartment abroad for as little as £55,000.. A survey by YouGov, the polling company, shows that nearly half of 18 to 29-year-olds plan to buy abroad, and two thirds of these say that this would be their first property purchase.. An important consideration is the property rental market in the country in which you are buying.. Even if the purchase price looks cheap, the initial costs of buying abroad are likely to be higher than in the UK, especially legal expenses.. Stamp duty is also likely to be higher abroad — in some countries it is as much as 10 per cent, compared with 1 per cent for the average first-time purchase in the UK.. Mr Boulger says: “If the purchase does not go well and you fail to make a profit, this may scupper plans to buy in the UK.”. If you keep the overseas property while buying in the UK, it may be harder to find a willing lender because other mortgage commitments will be taken into account when deciding what risk you pose and how much you can afford.

India’s Special Economic Zones (SEZ) policy, announced in April 2000, has been the single most important initiative ever taken by the Indian government to promote private investment in industrial activity.. It is not the first time that India has tried to develop its SEZs.. India’s Special Economic Zones (SEZ) policy, announced in April 2000, has been the single most important initiative ever taken by the Indian government to promote private investment in industrial activity.. It is not the first time that India has tried to develop its SEZs.. Special legislation, the SEZ Act, was enacted for the first time in 2005.. Instead, the Ministry is now promoting the concept of national investment and manufacturing zones (NIMZs).. The winding up of MAT and DDT tax incentives has further slowed down investment and SEZs share in total exports declined to 17 percent in 2013–14.. However, SEZ policy must be designed to address institutional challenges that pose major obstacles to growth, and it needs to be supported by a transparent legal framework.. SEZs have the potential to be a major growth engine for India.

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