India: The emerging market to watch

Taj Mahal

As it currently stands China is the big go-to nation of emerging markets, investors are happy to pump millions in to Chinese investments, however not as many are doing so with India, and that could soon change.

Analysts and experts are tipping India to really push as the emerging market to watch, with a number of factors giving weight to the argument. Whilst China is probably the better short term prospect India is much less developed so there is much more room for growth over the next few years, and China could hamstring itself with the one-child law, something that is leading to a prematurely ageing population.

Of the BRIC nations, while China is still the undisputed leader, India certainly has much to offer for canny investors. In the last year, the MSCI India index was up by 22pc, but China grew by only 5.8pc. Forecasts suggest that the Indian economy will see a nine percent growth in the next year. The country has also made big strides politically, last year saw the election of its first single party government, succeeding the coalitions of years past. The new government is introducing ID cards to create a more efficient tax system and is focusing strongly on corporate governance.

Development is also in a better place than previous years, though there are still many poorly developed roads work is being done at a much quicker pace and some say the roads that previously took a year to build are now being built in a few days.

An area where India has one over its fellow BRIC members is commodities. India has less of a dependence on commodities than Brasil and Russia. India also supports its own industry and does not require a lot of exports, which protects it somewhat from global economic problems.

The farmlands where produce is grown are being tipped as good places for investment opportunities, and not just the big cities of Delhi and Mumbai. The middle classes of India are becoming a bigger consumer, which in turn creates more work in the rural areas, and this is leading to more business for the financial institutions.

Despite all these positive signs there is still a strong element of risk involved at the very present. It has been described as a rough diamond, a nation with undeniable promise but one that still needs a lot of work. However if that work is put in then we could be hearing a lot about India in the not too distant future.