India is presenting a positive mirror image of China’s debt, demographic and deflation worries. In a LinkedIn post dated December 21, Natixis EM Asia Senior Economist Trinh Nguyen made a case for why one should look towards India as a structural growth story.
In a post reviewing the year gone by for Asian economies, Trinh said, “We are structurally bullish on India, which we think is only at the cusp of its investment bull run that will be beyond 2024 and whoever wins the general elections (Modi is a shoe-in).”
India is entering an election year with PM Modi’s government preparing to present its tenth Budget in a row on February 1, one that’ll be a vote of account.
Also read: Upcoming Budget just a vote on account, no 'spectacular announcements': FM Sitharaman
JPMorgan's decision to include Indian government bonds into its benchmark emerging market index should lead to a higher inflow of investments into India in 2024, the senior economist added. Nguyen said that India has a lot of problems but debt, demographics and deflation aren’t one. The country’s trimmed balance sheet will provide fertile ground for the multi-year investment structural bull run, she added.
Also read: MC Explains | What does JPMorgan index inclusion mean for India, investors
Throwing more light on the prospects for India's economy which is now the fifth largest in the world, Natixis EM Asia Senior Economist Trinh Nguyen said Indian households will increasingly open their wallets and bet on rising economic cycle as they rotate out of deposits and gold into pensions and mutual funds. India will have more investors and not just foreign investors. The bet is that the government’s capex push for infrastructure, energy sector and so forth will percolate to the private sector, and fuel the boom, she added.
The great expectations of China lifting the region via imports and tourism have disappointed as demand seems to have faded, weighed down by its property market woes and weak overseas investment. China's sluggish imports have dragged Asian exports, but India not being a big trader yet has helped shield it from much of the impact, according to Nguyen.
On emerging markets, Nguyen said that 2023 was an abysmal economic year with India being an exceptional performer. 'Hope springs eternal as we look to 2024 with key drags dissipating', she added. The senior economist said that geopolitically India stands to gain as it presents a positive mirror image to China’s triple Ds (debt, demographic and deflation) woes. India's corporates have deleveraged with a debt ratio of 54 per cent of GDP (78 percent in 2012) versus China’s 165 percent, she said. In fact, as China grows it pushes India to the growth trajectory as well, with increased investments and capex plans, Nguyen said.
Weak global growth and liquidity that's in short supply could mean policymakers will be delicate with the economy and soften their stance. More policy space will open in 2024, said Nguyen.
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