Advertisement

Slow but welcome start to reform in India

While not the big reforms investors were hoping for, India’s new prime minister, Narendra Modi, is moving in the right direction.

India's new prime minister, Narendra Modi, is "taking his time about the change that investors are banking on", says Fidelity's Tom Stevenson in The Sunday Telegraph.

He is in charge of India's first majority government in 30 years, so markets were hoping that he would crack on with structural reforms, including trimming fuel subsidies and introducing a goods-and-services tax, which would beef up trade between India's many states. But no.

Advertisement - Article continues below

Still, that's not to say he's done nothing. "The small measures taken so far have at least focused on some big problems," as The Economist notes. A shake-up of the civil service and making permits available online has greatly improved the pace of approval of big investment projects.

The central bank's move towards an inflation target has improved credibility with the financial markets, and with price rises now subdued, interest rates may soon be lowered. Money that left India last year during the taper tantrum' has now returned.

All this suggests that growth should rebound to an annual pace of 6.5% or so from 5.5% this year. But unless Modi does a lot more, a return to the 9% GDP growth rate India enjoyed pre-crisis "is hard to imagine".

Still, India's problems are largely in the price, reckons Stevenson, so it is still worth a long-term bet. Aberdeen's New India Investment Trust (LSE: NII) is still reasonably priced, on a discount of 12% to net asset value.

Advertisement
Advertisement

Recommended

Bullish investors return to emerging markets
Stockmarkets

Bullish investors return to emerging markets

The ink had barely dried on the US-China trade deal before the bulls began pouring into emerging markets.
27 Jan 2020
Beware the hidden risks when investing in emerging markets
Investment strategy

Beware the hidden risks when investing in emerging markets

Emerging markets look cheap compared with developed countries, but earnings may be less trustworthy.
23 Dec 2019
How long can the good times roll?
Economy

How long can the good times roll?

Despite all the doom and gloom that has dominated our headlines for most of 2019, Britain and most of the rest of the developing world is currently en…
19 Dec 2019
Emerging markets: buy when the news is bad
Emerging markets

Emerging markets: buy when the news is bad

Emerging markets are being squeezed by local turmoil and by more general factors. But bad news can spell opportunity for investors.
5 Nov 2019

Most Popular

An economics lesson from my barber
Inflation

An economics lesson from my barber

On reopening his shop after lockdown, Dominic Frisby’s barber doubled his prices. It’s all part of the post-Covid inflation process – and we’re going …
8 Jul 2020
What gold, bonds and tech stocks have in common
Stockmarkets

What gold, bonds and tech stocks have in common

"Risk off" or "safe haven" assets such as gold and government bonds have been doing well lately. But so have riskier tech stocks. That seems to defy c…
10 Jul 2020
House price crash: UK property prices are falling – so where next?
Property

House price crash: UK property prices are falling – so where next?

With UK property prices falling for the first time in eight years, are we about to see a house price crash? John Stepek looks at what’s behind the sli…
2 Jul 2020