As an Indian citizen, you know how fast India is growing. For those who are not, the growth is too huge to make meaningful changes in the coming years that might alter everything you see and hear about India today. This ain’t just about saying it but witnessing it, and in this article, let’s explore how it’s evolving as a nation.
The Highlights of the Change Involved
1. Inclusion of India in the JP Morgan Benchmark Index
Currently, around $1 trillion in government securities are being traded in the Indian market daily. This can increase when India is included in the JP Morgan Chase and Co. Benchmark Index this year.
Why would that be? It’s no bummer that it can attract the attention of international investors and increase the cash flow in the Indian market. The inclusion news itself speaks of the development, the progress India has made, and how it is depicting its sustainability.
How is the inclusion in the benchmark index such great news? Surely, the inclusion can attract many investors, not only because it is being included but also because it can leverage the fact that Russia was excluded from the index due to geopolitical events and the unappealing debts of China.
Anticipation of a 40 billion dollar inflow is expected, as per Goldman Sachs, which can turn out to be positive news for the Indian economy. Also, the current foreign investors’ holdings are limited to not more than 6%, and as of March, their holdings are currently at 0.4%, which can increase in the future.
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2. The Objectives of the BRICS Group
The BRICS is a group of Brazil, Russia, India, China, and South Africa. The member countries cooperate on various political and economic issues and share common goals related to global governance, development, and the reform of international institutions.
They are now involved in coming up with new initiatives. These nations want to balance the influence of Western countries on global events. They also have the objective of limiting the opposition from other political parties within the country and the press’s involvement. They plan on creating an alternative financial system where they have less dependency on the US dollar.
3. The GDP Growth
India’s GDP growth of 7.6% in the previous quarter exceeded the expectations of the RBI, which estimated it to be 6.5%. This echoes the condition of the economy, which is healthy at the moment. With PM Narendra Modi’s initiative of increasing investment in infrastructure and providing subsidiaries to the company, its GDP has outpaced the economic growth compared to major other countries, standing out as the fastest-growing country. This is not only a growth contribution from the agricultural sectors alone but also from the non-agricultural sectors.
For the very first time in 30 years, India is no longer considered a laggard behind China in economic growth with its performance in 2022. The growth was so massive that it almost grew twice by $266 billion in GDP compared to the growth of China, which was $146 billion that year, and it can continue to outpace for at least the next seven quarters, as anticipated by the 40 economists in the world, and the fast-growing GDP would last for at least the short to medium term, according to the economists.
The long-term growth trajectory of India will surpass that of Japan, the third-largest economy in the world, by the year 2027, whose GDP is $5 trillion.
4. The Performance of the S&P BSE 500 Index
In the previous year, the S&P BSE 500 Index outperformed the rest of the world. This is said in comparison to the global emerging market benchmark for equities. The performance of the companies in the S&P BSE 500 Index gave a yearly average return of 16 percentage points more than the Emerging Market Index benchmark, which measures the performance of equities in emerging markets globally.
Compared to Chinese companies, Indian companies have appreciated faster in 2023, and speaking of the annualized returns compared to Chinese companies, Indian companies’ returns are 37 percentage points higher, which crushes the previous returns of the Indian companies, which were 8 and 3 percent, respectively, in the past 10 and 20 years.
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5. The international investor’s confidence in Indian corporates
The investor’s confidence in the Indian market is so high that they are willing to pay a higher premium to purchase the shares of Indian companies compared to Chinese companies. Considering the depreciation, earnings before interest, taxes, and amortization expenses, investors are ready to pay 82% more for Indian shares than for Chinese shares Over the past year, Indian companies have gained about 26% compared to the Chinese companies’ average performance, and Chinese shares depreciated by about 12%
In the past 12 months, here are the two companies that performed exceptionally well. Limited, loans and financing provider REC, Gurugram-based, to states and companies for power generation, transmission, renewable energy, as well as infrastructure, witnessed a remarkable 286% rally during the past 12 months. This constitutes the best return among the 35 specialty finance companies globally. Kaynes Technology India Limited, a maker of electronic components based in Mysore for auto, railway, medical, fence, and consumer companies, beat all its 80 major peers worldwide by appreciating 235% during the past 12 months.
6. The Bond Market’s Growth
Last year, a total return of 7% was given by the government bond with a rupee denomination. The return mentioned here considers both interest and the appreciation of the bond value. The Indian government bond has outperformed all the benchmarks in the world, having returns ranging from 3.5% to 5.9%
Surpassing regions like Asia, Africa, the Middle East, and Europe, and the world’s local government bonds, Indian government bonds returned 20% over the past 5 years. Not just that, the Bloomberg-compiled data says that India has outperformed peers in the last 2, 5, and 10 years.
The Wrap
The long-term growth may come with challenges due to the 1.4 billion population, weather conditions, and price control by the government. Moreover, the volatility of the bond market, which was at 16% ten years ago, has now come down to 3.4%. That speaks to the stability of the bond market.
With things looking positive, India is sure to see massive attraction from foreign investors, which will be good for the growth of the economy.
