Narendra Modi courts the diaspora

India's prime minister Narendra Modi will address a crowd of 60,0000 British Indians at Wembley Stadium.

15-11-12-Modi-634
Narendra Modi: a dab hand at "belligerent provocation"

India's prime minister, Narendra Modi, is "a charismatic international statesman", says Victor Mallet in the Financial Times. But his three-day trip to Britain this week, including an address to 60,0000 British Indians at Wembley Stadium, "will for the first time be overshadowed by trouble at home".

"It makes sense for Modi to court" the diaspora, notes Una Galani on BreakingViews.com: the World Bank estimates it has savings of $44bn. But the "rock star welcome" jars amid recent setbacks at home, including what Moody's Analytics called the "belligerent provocation" of religious minorities by Modi's Hindu nationalist governing party. That may well have contributed to the government's defeat in a state election last week, which will make it harder for the BJP to push through key reforms.

Land acquisition laws are currently very restrictive, notes Capital Economics, so it's no wonder that the number of new large-scale investment projects is sliding to multi-year lows. If this isn't addressed, Modi's goal of turning India into a manufacturing powerhouse could be thwarted. Modi also wants to harmonise VAT rates across the country to promote trade and growth. But at this rate, it may not happen until2017.

Still, it isn't all gloom. The government has stepped back from applying retrospective taxesto foreign financial companies. Corporate tax is to be cut from 30% to 25% in the next few years, and a national infrastructure and investment fund should boost public investment. The government has also streamlined the approvals process for investment projects and slashed the time required to register a business.

Meanwhile, the macroeconomic backdrop has improved. The falling oil price has given the central bank scope to cut interest rates. And India's longer-term advantages including a world-beating pharmaceutical sector that has been growing at an annual rate of 20%, and encouraging demographics remain intact.

By 2025, India is expected to have overtaken China to become the world's most populous country. In five years' time the average age will be 29, compared to 37 in China and 48 for Japan. All this implies an expanding workforce and rising consumption for years to come. Our favourite India play, the New India Investment Trust (LSE: NII), is currently on a discount to net asset value of 10%.

Recommended

I wish I knew what an emerging market was, but I’m too embarrassed to ask
Too embarrassed to ask

I wish I knew what an emerging market was, but I’m too embarrassed to ask

This week's “too embarrassed to ask” explains what emerging markets are, and why you might want to invest in them.
9 Sep 2020
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

Most Popular

Here’s why you really should own at least some bitcoin
Bitcoin

Here’s why you really should own at least some bitcoin

While bitcoin is having a quiet year – at least in relative terms – its potential to become the default cash system for the internet is undiminished, …
16 Sep 2020
Will a second wave of Covid lead to another stockmarket crash?
Stockmarkets

Will a second wave of Covid lead to another stockmarket crash?

Can we expect to see another lockdown like in March, and what will that mean for your money? John Stepek explains.
18 Sep 2020
James Ferguson: How bad data is driving fear of a second wave of Covid-19
UK Economy

James Ferguson: How bad data is driving fear of a second wave of Covid-19

Merryn and John talk to MoneyWeek regular James Ferguson about the rise in infections in coronavirus and what the data is really telling us.
17 Sep 2020