Monday was a big day for India’s economy and exchange traded funds (ETFs). But in the long-term, does India have what it takes to keep the rally going forward?
There is much investor interest in seeing what India’s government will do to invigorate a slowing economy, report Cherian Thomas, Kartik Goyal and Shobhana Chandra for Bloomberg. It is thought that India’s economy would need at least another stimulus equivalent to 1% of GDP.
Fiscal and monetary policies in place are currently worth more than $85 billion, or 7% of GDP. Potential increases in budgets could drop India’s credit rating to junk status and Standard & Poor’s previously stated that India’s spending is “not sustainable.”
The Indian rupee is projected to gain more than 8% by March as outlook for growth and capital inflows improved upon a more stable government, remarks Anoop Agrawal for Bloomberg. The economy is estimated to post growth of 7% in the fiscal year.
India did not feel the full brunt of the economic crisis because it was not “open” to take a full blow and its banks and financial corporations were not weighed down by “toxic” assets, writes Edward Hugh for RGE. The new government should also provide stability and sound economic policies.
This year’s monsoon rains is likely bring average rainfall and would help sustain a 4.3% average annual farm production growth, which would increase income for three-fifths of India’s population. The car, cement, electricity and refined petroleum sectors are showing signs of a steady recovery. The country will also see a younger, healthier and more educated workforce in the years to come.
- PowerShares India (PIN): up 42.2% year-to-date
- WisdomTree India Earnings (EPI): up 47.7% year-to-date
Max Chen contributed to this article.