With the announcement by India’s election commissioners that the country’s 2024 general election will take place from 19 April to 1 June, James Burns, lead manager of Evelyn Partners' Active Managed Portfolio Service, looks at how investors can tap into India’s growth story.  

India’s economy has been growing rapidly in recent years, aided by meaningful structural reforms introduced by Narendra Modi’s ruling Hindu nationalist BJP government and significant infrastructure investment, according to James Burns at Evelyn Partners.

“With Modi the clear frontrunner to win a third five-year term as prime minister, this should result in the longest period of stable government since Independence and investors will be hoping for a continuation of business-friendly policies,” Burns said in a note. 

Burns highlighted how Modi’s BJP party is entering the parliamentary election campaign with India being the fastest-growing major economy in the world, with GDP growth having hit 8.4 per cent in the last quarter of 2023.   

Now the world’s fifth-largest economy, India is benefiting from being a major link in the world’s supply chains (accelerated after the pandemic and due to US trade tensions with China), with its youthful demographics, vibrant IT and related sector, and other factors. Over the past decade, the country’s government has enacted reforms including moves to root out excessive use of cash and digitalise the country, improving tax collection and investing in infrastructure. Once a protectionist country with a plethora of restrictive practices, and hobbled by extensive red tape, the country is – hopefully – moving in a more open direction. 

Compelling story
“For investors, the case for India is compelling on both a longer and medium-term view,” Burns continued. “For example, India is well positioned to benefit from foreign companies seeking to reduce over-reliance on China as a manufacturing centre, an example of which is Apple which is seeking to move iPhone production to India. Under Modi, investment in infrastructure has increased and incentives have been provided to attract electronics manufacturers to help India compete on the international market,” he added.   

“But India is much more than a low-cost manufacturing story, the growth of domestic consumption is a really exciting theme, powered by a fast growing young population and rapidly expanding middle class (approximately a third of the population is estimated to be between 20 and 33 years),” Burns said. “This will help drive economic growth for decades. According to analysis published by BMI, the country’s consumer market will become the third largest in the world by 2027 fuelled by rising numbers of middle to high-income households."

Burns is not alone in his views. Shishir Baijal, chairman and managing director of Knight Frank India, believes that India is increasingly recognised as an attractive investment destination for global and domestic investors, owing to its robust domestic consumption, long-term economic stability, and extensive infrastructural development. â€śMoreover, in the aftermath of the Covid-19 pandemic, investors are inclined towards diversifying their portfolios geographically to mitigate risks. In this context, India, with its strong fundamentals, offers a viable opportunity,” Baijal said.

Amundi, a European asset manager, has also released its 2024 Global Investment Outlook, which points to slower and fragmented growth offering sequential opportunities, with India growing faster than China. See more commentary about India here, and here.