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Investment: India takes on China
Sometimes it seems, in the investment world at least, that people speak of nothing but China, writes Merryn Somerset Webb
Even the most junior of City analysts can quote an amazing array of China-related figures – from the percentage of the world's large cranes operating in Shanghai to the amount of steel that would be needed were every household to own as many cars as the average American family.
There is a consensus, and probably a reasonable one, that China will grow at 8-10% a year for the indefinite future. But it’s easy to forget that China may not actually be the fastest-moving emerging market.
Instead, according to Goldman Sachs, there is every chance that over the next four decades India will be a better bet: Goldmans forecast that in a mere 30 years the Indian economy will be larger than that of the USA.
This isn't as mad as it might seem. We mainly think of India's service industries (call centres and computer-related work) but thanks to a huge, cheap and increasingly well-educated workforce (500,000 graduate from university every year), it is home to a huge variety of global companies.
The result is a fast-growing middle class anxious to buy the lifestyles we in the West have long taken for granted.
India isn't perfect; it still suffers from widespread poverty, its infrastructure is substandard and corruption has made its way into every part of every system.
However, most of these negatives are changeable and the good things about the economy – the growth, the vibrancy, the profit potential – appear to be unstoppable.
The point to all this is simple: it makes sense to have a small amount of money invested in India over the long term.
It is impossible to tell how things will go in the shorter term – we just don’t know how India will be affected by the US slowdown and the Indian market is not cheap, so I'd be inclined to invest over a few months rather than all in one go.
The best way is probably via an exchange-traded fund (ETF), which tracks the performance of the markets' biggest stocks such as the S&P CNX Nifty, which you can buy through any stockbroker.
If you are feeling adventurous you might look at the London-listed Indian Film Company which invests in the film industry – one of the fastest-growing sectors.
As people get richer they spend more on leisure; 65% of Indians are under 35; and the under-35s go to the cinema three times a year more than the over-65s on average.
There is clearly money to be made here and, with a bit of luck, IFC might make some of it.
* Merryn Somerset Webb is Editor of MoneyWeek. Her views are personal and investors should always seek professional advice.
* This article first appeared in the December edition of Saga Magazine
