The Miracle and mystery of India’s economy

2014 has been the worst year in the two last decades for China’s growth. With just 7.2 percent, China’s economy has grown so much that it’s now time for it to shift from an export economy to a more stable in the long term and stronger domestic demand economy. Here thus comes India as the new hunting ground of growth opportunities for investors. Making a mere one fifth of China’s GDP, India’s economic potential would be as large as China’s 20 years ago, except for the cultural and bureaucratic challenges which seem far more difficult obstacles to overcome. The World Bank ranked India as the 142nd-hardest place to do business out of 189 countries.

According to analysts, India is likely to outmatch China’s GDP with a 2015 growth forecast at 7.4 percent. There could be a rally indeed, but nobody knows how long it will last, warned experts, chiefly if you remember the recent change in growth statistics methodology that was decided by business-friendly Prime Minister Narendra Modi government. “Overnight, GDP growth in fiscal year 2014 was upgraded from 4.7 percent to 6.9 percent,” CNN Money wrote. There could be a twist in the Indian miracle as a result. Even “if this kind of growth continues and China continues to perform at a lower level, then still it will take 20 to 30 years to catch up,” explained Ashish Kumar, Director General at India’s Central Statistics Office.

Despite the country’s progress, “there are still too many barriers – hoops to jump through, bureaucratic restrictions – that make it hard to start a business, or to export, to import, to close a deal, deliver on a deal,” US President Barack Obama said in a January 2015 visit to New Delhi. However there are people like Geoff Dennis of UBS who considers that as long as the deficit is lower than 4 percent of GDP, there is reason to remain overweight on India. “The million-dollar question going forward is whether global investors should continue to prioritize India over other emerging markets. I say the answer is yes,” stressed Jeff Reeves of InvestorPlace. The secret for investing in India could be focusing on specific sectors which are likely to experience very high levels of growth like the confectionery market or the wireless business.