The Viability of Investing in India

India boasts a booming economy as well as a youthful and dynamic workforce but equally shows a number of risks.

It is well documented that China has solidified its position as an emerging economic powerhouse for a number of years now. However, attention has begun to shift to India, a country that has a thriving IT sector and business outsourcing industry as well as a rapidly growing gross domestic product, estimated at $3 trillion.

India Gross Domestic Product 2020

Near Exponential Population Growth

All this is coupled with the Indian population’s almost-exponential growth. With its population currently at around 1.36 billion, it is predicted that India will become the most populous place on the planet by 2035. One lesser-known asset of the Indian economy is its booming farm industry, which ranks second in the world. India also ranks 12th in the world in terms of nominal factory output.

Workforce Slated to Become Largest in World

According to the U.S Census Bureau, the Indian workforce is pitted to become the largest in the world by 2025. This workforce consists of young and educated individuals, since half of the Indian population is under the age of 25. Politics also has an important role to play in making India a viable place of investment. Its democratic political system and liberal policies make it a safer destination when compared to other developing economies like China, which has more restrictive policies.

Investment Options

Exchange-traded funds (ETFs), such as WisdomTree India Earnings Fund ETF and iPath MSCI India Index ETN, offer the easiest method of investing in the thriving nation and provide more peace of mind regarding the legal and tax implications of buying American Depository.

Investment Drawbacks

However, there are drawbacks with any investment destination, and India is no exception. Geopolitical instability in the form of terrorist attacks create short-term risks for investments while the Indian rupee is among the worst Asian currencies, consistently falling against the US dollar. This is beneficial for India as the country sets its eyes on becoming the top exporter globally, but the weakness of the rupee is a real downside for foreign investors holding assets in India. Half of India’s foreign debt is held in terms of US dollars, which could prove to be a real problem for the nation given the decline in the rupee. Government debt in India rose by more than 50% since 2014 and now hovers at around 80% of GDP. Other emerging economies have government debt of around 40-50% of GDP, for comparison.

India Rupee vs USD - 2005-2021

Finally, investment in India can prove difficult. Real estate buyers face a number of hurdles there as you cannot legally purchase property in the country unless you have Indian citizenship or a PIO (Person of Indian Origin). As a stock trader, investing can also be difficult unless you use one of the methods mentioned above. To directly buy stocks in India, you need to be a Qualified Foreign Investor (QFI) and achieving this is not easy.

Possible Paths for Investment

Despite that, India still represents an attractive investment opportunity within certain frameworks. It is just important to research you options thoroughly. If you are looking to invest, here are some options:

Indian ETFs, which include:

  • WisdomTree India Earnings Fund ETF (NYSE: EPI)
  • iPath MSCI India Index ETN (NYSE: INP)
  • Invesco India Portfolio ETF (NYSE: PIN)
  • iShares S&P India Nifty 50 Index Fund (NASDAQ: INDY)
  • Market Vectors India Small Cap Index ETF (NYSE: SCIF)

India’s most popular ADRs:

  • Tata Motors Limited (NYSE: TTM)
  • ICICI Bank Limited (NYSE: IBN)
  • Dr. Reddy’s Laboratories Limited (NYSE: RDY)
  • Infosys Ltd. (NASDAQ: INFY)
  • India Limited (NASDAQ: REDF)

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