With the Indian stock market hitting new highs, FDI inflow increasing, and significant investments being made in infrastructure, experts are considering India as a promising alternative to China. According to a report by CNN, amidst China’s ongoing property crisis, capital outflow, and economic uncertainties, market experts are looking towards New Delhi as a “real alternative” . The report further highlighted that market watchers are quite keen on Prime Minister Narendra Modi’s return to power for a third straight term in the upcoming Lok Sabha polls which will bring greater predictability to economic policies.
According to financial professionals, India’s economic progress under PM Modi’s leadership since 2014 has garnered attention from financial professionals worldwide. PM Modi has set ambitious goals for the country, aiming to achieve a USD 5 trillion economy by 2025. This vision has instilled confidence in India’s growth trajectory and potential as a key player in the global economy. In contrast, China is facing various economic challenges, including a rapid outflow of capital, creating a sense of uncertainty among investors.
Notably, the optimism around the world’s most populous nation is in stark contrast to the mood found in China, which is grappling with a myriad of economic challenges, including an accelerated flight of capital from the country, CNN reported.
The Chinese stock markets have suffered a protracted slump since recent peaks in 2021, with more than USD 5 trillion in market value having been wiped out from the Shanghai, Shenzhen and Hong Kong bourses.
Foreign direct investment (FDI) plunged last year, and fell again in January, down nearly 12 per cent compared to the same month in 2023.On the other hand, India’s stock market, is hitting record highs. The value of companies listed on India’s exchanges surpassed USD 4 trillion late last year.
According to CNN, the future appears even brighter as India’s market value is expected to more than double to USD 10 trillion by 2030, according to a Thursday report by Jefferies, which would make it “impossible for large global investors to ignore.”Peeyush Mittal, a portfolio manager at Matthews Asia, a San Francisco-based investment fund said that there is no country like China other than India.”China is a no go, so…which is the other country that can maybe replace China?” said Mittal.
“There’s no country like China other than India … in some form or fashion, it is the substitute that maybe the world is looking for to drive growth,” he said.
Japan has also benefited from investors seeking an alternative to China — Tokyo’s benchmark index hit a new high for the first time in 34 years last week, helped by improving corporate profits and a weak yen. But the country is stuck in recession and recently lost its position as the world’s third biggest economy to Germany.
As India heads towards national elections in the coming months, market watchers are hoping for PM Modi-led Bharatiya Janata Party’s return to power for a third term, bringing greater predictability to economic policies for the next five years, CNN reported.”If Modi is back with a majority and political stability is there, then I can certainly say with confidence that there’ll be a lot more investor interest in India on a more sustainable basis,” said Mittal.
Also, there are good reasons for the euphoria around India. From a surging young population to humming factories, the country has a lot going in its favour.The International Monetary Fund expects India to grow by 6.5 per cent next financial year compared to 4.6 per cent for China. Analysts at Jefferies expect the country to become the world’s third largest economy by 2027.
Much like China more than three decades ago, India is only at the beginning of an infrastructure transformation, spending billions on building roads, ports, airports and railways.
Aditya Suresh said that there is a “very strong multiplier effect” on the economy from the investments in digital and physical infrastructure, which “you cannot roll back.”The world’s fastest growing major economy is also trying to capitalize on the rethink underway among companies on supply chains. Global businesses want to diversify operations away from China, where they faced obstacles during the pandemic and are exposed to risks arising from tension between Beijing and Washington.
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