The Indian giant has arrived
- India close to replacing China as preferred global partner
- Is now the time to invest in India?
- India, the new China?
India can achieve these ambitions by working with Western policies, but it still has a long way to go to unseat its neighbour in global economic growth leadership.
Economic growth is synonymous with China. Or so it has been ever since the Asian giant's economy stormed into every market thanks to the negligible production and labour costs it offered. Almost two decades later, India is undergoing the same process of change.
As the growth of China, which Western governments see as a competitor rather than an economic partner, slows, in India, another emerging economy is emerging as the world's next engine of growth.
India is trying to use Western restrictions and measures imposed on the world's second largest economy to attract more investors into its promising technology, automobile and aviation industries to compete with its neighbours.
India close to replacing China as preferred global partner
India could become the largest shareholder in purchasing power by 2028. Experts explain that the Indian state attracts foreign capital because of its stable political composition and consumption-based economy.
So far, the Chinese government's stimulus measures have had little impact on capital markets. This is because investors are waiting for measures that have a greater impact on demand and excess household savings.
Unlike China, India is more attractive to Western investors. Supply chain problems during and after the pandemic have led some strategic investments by major Western companies to relocate to other countries. Among them is India, which supports investment promotion policies.
The Southeast Asian country has experienced significant growth in the last four years, positioning itself as an alternative as the world's most populous country. This was achieved by attracting foreign capital thanks to a more stable political configuration and a consumption-oriented economy.
According to International Monetary Fund (IMF) projections for the next five years, even in the most pessimistic scenario, India's share will overtake China's by 2037 if its growth rate remains below 6.5%.
A peculiarity of the Asian nation is that it stands out as the only developed country with a population large enough to replace China's retiring factory workers. Between 2020 and 2040, about 48.6 million middle-skilled workers, mainly factory workers, are expected to retire in China. Some 38.7 million Indians will replace these workers.
Is now the time to invest in India?
2023 was an important year from a demographic point of view. With a population of more than 1.4 billion, it has overtaken China to become the most populous country in the world. This change was accompanied by a birth rate that almost doubled compared to the Asian region.
Despite the potential, we are in an environment where the global economy is at risk of slowing down. Therefore, it is best to wait until conditions improve before taking steps to aggregate this type of economy.
However, for investors interested in investing in the area, our fund finder has several funds available, including those listed below. Before investing, it is important for each individual to consider all the options available and choose the asset that suits his or her profile and needs. Investing in India involves high risk and clients should be aware that they may lose their capital.
Indeed, the Indian stock market is booming, foreign investment is pouring in and the government is preparing to sign new trade agreements with the young market of 1.4 billion people.
India, the new China?
Despite all the optimism, India's 3.5 trillion dollar economy remains small compared to China's 17.8 trillion. Poor roads, incomplete education, bureaucracy and a lack of skilled labour are just some of the many disadvantages Western companies face in setting up shop.
Moreover, it was the fastest growing economy among the so-called large economies in 2023. This trend is expected to continue in 2024, outpacing China, the United States and other developing economies.
By contrast, Beijing's economic decline in recent years has been unusual. In addition to the impact of restrictions to combat the COVID-19 pandemic, the slowdown in growth reflects the structural changes needed for a more sustainable growth model. A transition to an economy with a better balance between investment and consumption could ensure moderate growth and a break with the double-digit growth rates of the 1980s and 2010s.
In this context, the question arises whether India can serve as a new catalyst for global economic dynamism. To answer this question, it is necessary to assess the current state of the Indian economy and compare it with the previous state of China.