These Days, Money Loves India!

Morgan Stanley chief strategist says the way India handles fiscal deficit, manages interest rates, and has grown FDI (foreign direct investment) is the best he’s seen in over twenty years.In addition, data from JP Morgan sees Indian shares making 2023 its eighth straight year of gains. Meanwhile, while, global investors continue to sell down their holdings of Chinese stocks, they have purchased $15.8 billion of Indian equities since the start of this year.

Nicholas Spiro, expert on advanced and emerging economies and a regular commentator on financial and macro-political developments, wrote in the South China Morning Post: “What is clear is that India is ticking many of the boxes that matter to international investors. Not only is it the world’s fastest-growing major economy – it expanded at an annualized rate of 7.8 percent in the second quarter, powered by the service sector – it boasts strong corporate earnings driven by a long-awaited pickup in private investment.

“Just as importantly, Asia’s third-largest economy is the leading beneficiary of the sharp deterioration in sentiment towards China over the past several years. Although Indian stocks were already surging before Chinese shares peaked in early 2021, the rally has been turbocharged by the succession of policy shocks in China.”

According to the World Economic League Table 2023, “the pandemic had a particularly devastating effect on India – in absolute terms, India has the third highest death toll globally. This, in turn, led to a significant decline in economic activity, with output contracting by 6.6% in fiscal year 2020/21.

“A sharp rebound in economic activity followed, fueled by an uptick in domestic demand, as the pandemic subsided, resulting in GDP growing by 8.7% in fiscal year 2021/22, making it the fastest-growing major economy in the world.”

Inflation in India has been lower than in most other large economies and India’s inflation remains both closer to its target range, and to the previous decade’s average of 5.8% than in many other countries. Moreover, much of India’s current inflation rate reflects higher food prices, an erratic item but one that also accounts for a larger share of the consumer basket than in any other G20 country. The uptick in inflation has nevertheless been softened by India’s purchase of discounted Russian energy.