| India has the potential to be the next great bull | | | | such as elementary education, water and health, |
| market of the 21st century - an opportunity of | | | | rigid labor laws, and still lacks the consensus that |
| being a better investment than even China!Like | | | | exists in China for welcoming foreign investment |
| China, India was stuck with a failed economic | | | | and placing a high priority on economic growth. |
| system for over 50 years. It was a bureaucratic, | | | | India's infrastructure such as roads, power and |
| socialistic state that led to weak growth, and | | | | ports is also in desperate need for investment. |
| stymied entrepreneurship and initiative. Famines, | | | | This is one area that China is way ahead of India. |
| lack of investment, and poverty were the | | | | The other is China's ability to attract roughly ten |
| result.But In the early 1990's, the country changed | | | | times as much foreign direct investment.India's |
| course and started to open up its economy to | | | | economy is doing well but is still below its potential. |
| the world. Personal marginal tax rates have fallen | | | | Just think if India embraced foreign investment, |
| from 50% to less than 30%. Tariffs and import | | | | privatization, had the political will to improve the |
| quotas were slashed, exports are growing at a | | | | lives of workers in agriculture by consolidating |
| 20% annual rate, with America being its largest | | | | farms and using more technology to vastly |
| market. Only 10% of its economy is dependent | | | | improve productivity. If it can provide its citizens |
| on international trade, insulating it somewhat from | | | | with quality basic education and other services |
| external shocks. The banking system is much | | | | and put in place adequate power and other |
| improved, and non-performing loans have dropped | | | | infrastructure, it can create 100 million new jobs in |
| to less than 4% of total bank loans. It has fiscal | | | | industry and manufacturing.Still, compared to |
| crisis to accumulating $135 billion in foreign | | | | China, India does not get much attention except |
| exchange reserves.Here are six reasons that | | | | for the outsourcing issue and is - for now - largely |
| investors should consider tilting some of their | | | | under the radar screen of even sophisticated |
| long-term capital towards India and not | | | | investors. After a strong start this year, India's 30 |
| China.Unlike China, India is a functioning democracy | | | | company Bombay Sensitive Index (Sensex) index |
| with respect for property rights and the rule of | | | | was beaten down more than 20% but has |
| law. China's authoritarian state may have the | | | | recovered to be flat for the year.The challenge |
| advantage at making quicker decisions and pushing | | | | with investing in India right now is valuations of |
| through economic reforms but without | | | | the leading companies and the limited investment |
| democratic political reform it will eventually hit a | | | | options. Valuations may be getting a bit ahead of |
| speed bump the size of the Great China Wall. | | | | themselves with SENSEX companies trading at |
| India's multi-party parliamentary system with its | | | | around 17-18 times next year's earning |
| obstructionist bureaucracy is far from ideal but at | | | | projections versus 13 times for emerging |
| least the daily speed bumps on the road to | | | | markets as a whole.The Morgan Stanley India |
| market reform can be overcome.India is a natural | | | | Fund (IIF) is a closed-end fund that invests in |
| ally of the U.S. as it emerges on the global stage | | | | India's blue chips trading at $42, quite a bit off its |
| and plays classic balance of power politics. | | | | 52-week high of $57. It is a bit pricey right now |
| America's relationship with China will at best be | | | | and trades at a 17 % premium to net asset value |
| wary and tense. The fact that many Indian | | | | so caution is recommended until this premium |
| citizens speak English is also a significant | | | | comes down to the historical average in the low |
| advantage both commercially and politically.China's | | | | single digits. I would make only a modest allocation |
| state-owned companies have staying power but | | | | at this point. There are also some Indian ADRs |
| government ownership will limit their growth and | | | | trading on U.S. exchanges and these are also |
| potential. Foreign governments will be suspicious of | | | | expensive and trade at a price premium over the |
| their intentions and likely consider them as an | | | | India market price. My favorites are Dr. Reddy's |
| extension of the Chinese government. State | | | | Laboratories (RDY), HDFC Bank (HDB) and Tata |
| ownership will also lead to inefficiencies and an | | | | Motors (TTM).Be patient - there no doubt will be |
| inability to hold onto top management talent.India's | | | | great investment opportunities as well as new |
| capital markets are better than China's. India's | | | | investment vehicles to take advantage of this |
| stock market was established in 1870 and has | | | | great secular bull market. |
| 6,000 publicly-traded companies and a more | | | | India presents investors with the opportunity of |
| modern financial and banking system that allocates | | | | a lifetime and its democratic government, |
| capital fairly well. Only 10% of bank credit in China | | | | stronger financial system, market-based interest |
| goes to private companies. India has 100 | | | | rates and history of respecting property and |
| companies with a market cap over $1 billion.India | | | | intellectual rights may make it a better long-term |
| is a very youthful nation with 50% of its | | | | play than China.Carl T. Delfeld President & |
| population under 25 years of age. This leads to | | | | Publisher Chartwell Partners has over twenty |
| less strain on its national budget and the hope that | | | | years of experience in the global investment |
| the younger generation will drag the bureaucracy | | | | business with a strong background in Asia.- Author |
| and politicians to swifter implementation of market | | | | of global investor primer "The New Global |
| reforms. China's one-child policy has backfired | | | | Investor" |
| leading to an aging population which will lead to | | | | - President of the global investment advisory |
| manpower shortages and tremendous pressure | | | | firm Chartwell Partners |
| on its national budget. 20% of Shanghai residents | | | | - Publisher of the Chartwell Advisor ETF Report |
| are over 60 years old and by 2020, one-third of | | | | and Asia-Pacific Growth |
| Shanghai's population of 13.5 million will be over | | | | - Columnist on global investing with Forbes Asia: |
| 60.India has a more balanced and sustainable | | | | "Global Gambits" |
| economy with 64% of its GDP attributable to | | | | - Former U.S. Representative to the Executive |
| consumer spending and 50% of its GDP from | | | | Board of Asian Development Bank |
| service sector. China's economy is more | | | | - Chairman of the global economic strategy think |
| dependent on foreign investment, exports and | | | | tank ChartwellAmerica |
| resources. India's 250 million living in poverty is a | | | | - Asian specialist with the U.S. Joint Economic |
| tragedy but it's middle class has quadrupled during | | | | Committee and the U.S. Treasury |
| the past two decades to reach 250 million as | | | | - Former member of the U.S. Asia Pacific |
| well.For sure India has its challenges: big | | | | Economic Cooperation Committee |
| infrastructure needs, frustrating red tape and a | | | | - Former investment executive with Robert Baird |
| tendency for the government to hang on to large | | | | & Company and UBS |
| state-owned enterprises to mention a few. It has | | | | - Graduate of the Fletcher School of Law & |
| recently suspended its privatization program, has | | | | Diplomacy with economics scholarship from U.S. |
| high levels of public debt, very poor basic services | | | | |