Ayhan Chemal  Financial Analyst, R5
Ayhan Chemal Financial Analyst, R5

The rise of the elephant

India Investor Summit - London Stock Exchange - January 2016
In January this year, I was invited to attend the India Investor Summit, which focused on economic developments undertaken by the Indian government since its election in 2014. Whilst, commodities are at the centre of the fall in global markets, not all commodity-pegged countries are sharing the same experience, with India bucking the trend.

India has positioned itself as a safe market
India has positioned itself as a safe market

India has been a leader in economic growth over recent times. The “land of festivals” boasts resources such as sugar and steel, and infrastructure is becoming one of the most flourishing industries of the country, with public-private infrastructure projects supported by the UK, and India’s Ministry of Finance. The economy is at a tipping point, but for this to be sustainable interest rates need to return to previous levels, as public expenditure must be at a level to support the economy. 

Last year, IMF forecasts indicated that India would be the fastest growing emerging market economy in 2016, which highlights the opportunity for India to secure foreign investment. With emerging markets estimated to deliver only single digit returns over the next few years, as many of these economies move towards maturity, investment in India has soared. In fact, the Rupee has the potential to become one of the most liquid pairs in the foreign exchange market. But sustaining this growth will come at a cost to India’s system of taxes and subsidies. 

Most emerging markets are in a period of transition, and India has positioned itself as a safe market, but one that can provide significant growth for investors. In order to boost economic growth Prime Minister Narendra Modi has initiated the ambitious Start-Up India Movement, which has provided more that 170 million people with loans for SMEs. The service sector grew by 9% in 2015, and the establishment of high technology firms in Bangalore (the Silicon Valley of India) is seen as a major pillar in the development of the economy. The start-up ecosystem in India is still at an early stage and a growing number of IT companies are choosing to raise capital through IPOs.

With this focus on economic development, India looks like it will continue to be one of the most successful emerging market economies. A measure of this comes from India’s Minister of Finance, Arun Jaitley, who said that he expects India’s economy to grow faster in 2016 than in the previous year.