With Prime Minister David Cameron having spent part of last week in India – and with a significantly larger entourage than that which accompanied him to the US the previous week – casting a glance at the sub-continent seems appropriate.
It is, after all, the world’s biggest democracy, with a population forecast to overtake that of China in the first half of this century, a nuclear power and a member of the G20. And they speak English, though admittedly not exclusively.
India has been a tale with two distinct story lines. Rapidly developing a position as the global service provider of choice, in contrast to China’s manufacturing dominance, much of the population is nevertheless consigned to grinding poverty. The middle classes are expanding but, as with China, the spending capabilities do not amount to a great deal when compared with our bloated lifestyle in the West.
But India is creating prosperity, not least for those who have chosen to invest there. According to Deepak Lalwani of Astaire, over the past five years, £100 invested in the FTSE 100 index would have turned into £101, a similar amount in the Dow Jones Industrial Average would have netted a gain of £10 – better, but no cigar – while India’s Sensex index turned £100 into £247. No contest really.
The country does enjoy growth rates that we in the developed world can only dream about. They also suffer considerable – and persistent – inflationary pressures. For much of this year, the rise in the cost of living has been in double figures. Interest rates are high there, relative to us anyway, but at least part of the problem has been down to higher food prices because of last year’s drought. This year’s monsoon season is already looking more encouraging.
Deepak, a recent recipient of the OBE for services related to encouraging business and investment links between our two countries, has been promoting the India story for some time, one imagines to the benefit of his clients.
I am fortunate enough to be a recipient of his regular bulletins on what is going on out there. His most recent suggests corporate earnings are set to grow by 22 per cent this year and that the market would be even higher, were it not for the sovereign debt crisis in Europe.
It is not an easy market, though, as I discovered myself when endeavouring to grab a piece of the action some years ago. Then, private investors seeking to invest directly had to contend with poor corporate governance and arcane business laws. Fortunately there are now a number of funds specialising in this market. With the continuing uncertainty over what the future holds for the indebted, demographically challenged developed world, who is to say whether India might not prove a core holding for investors in the future.
All this prompted me to assemble a talk entitled, Is the West finished as an investment proposition?
I have yet to flesh out the arguments fully but the speed at which emerging markets are assuming the mantle of the old developed world is truly alarming.
I recall when Dr Mark Mobius was considered an adventurer, tracking down investment ideas in areas where few would dare to tread. Today, ignoring them seems a bigger risk, even if the paths to emerging riches remain booby-trapped.
Brian Tora (email@example.com) is principal of the Tora Partnership