You don’t have to go far to find a recommendation in the financial pages on the lines of: “Hot tip: I’d put all my money in India – but only for the long term”. This example was in the Sunday Times on 8th November. In other words, “Buy now and live with the losses until investment in India becomes profitable again”.
The International Monetary Fund has predicted that India will be the fastest growing major economy in the world by 2016. The growth rate is expected to be 7.5% a year until 2020, higher than China at 6.3% or the UK at 2.2%.
However, bureaucratic red tape and structural inefficiencies will continue to hinder India’s development. Thus, against the amazing potential must be set the problem of corruption being routine, massive inequality at a level unknown in Europe and the habit of the bureaucracy treating foreign companies as ATMs.
On 10th November the Financial Times reported that Nestlé had restarted sales of its Maggi instant noodles in India after trumped-up food safety scares left the company with $77m in direct losses, cost its country chief his job, led to the destruction of 37,000 tonnes of packaged noodles and impoverished thousands of fast-food stall owners and distributors. The noodles were sold across India and cooked at roadside stalls dubbed “Maggi points”.
The trouble began in June when the Food Safety and Standards Authority of India banned the sales of the Maggi instant noodles on the grounds that tests showed them to be “hazardous and unsafe for human consumption” because of excessive levels of lead.
The Mumbai High Court lifted the ban describing it as arbitrary and “a violation of natural justice”. The Indian authorities, never shy of targeting foreign multinationals, raised the stakes with a Ministry of Consumer Affairs lawsuit claiming $100m over Nestlé’s alleged misleading of customers with “hazardous, defective and misbranded products”. Nestlé will almost certainly win in court, as have Vodafone, Cairn and SIS Live in similar cases.
An Indian job advertisement for tea boys and night guards has attracted 2.32m applicants, including highly qualified graduates, in a sign of how desperate the swelling millions of young Indians are for work and job security. (Financial Times 19 September 2015)
There is no doubt that the potential in the future is enormous. But, look at some of the charts today and decide how brave you want to be. When the time comes there is plenty of choice; FE Trustnet holds data for 30 unit trusts/OEICs, four investment trusts, 360 offshore funds and 32 ETFs as well as life assurance company life and pension funds.