India may hit the demographic “sweet spot” within the next decade. There’s a lot of fixing up and balance-striking the country needs to do to keep its exchange traded funds (ETFs) upwardly mobile.
Currently, the savings rate in India is about 35% of GDP and it is expected to further increase as income and population grow, writes Niranjan Rajadhyaksha for livemint. Double-digit growth may be sustainable if domestic savings rate hits 40% of GDP and if the government keeps deficits in check. However, previous years have shown that India’s economy tends to overheat as the economy expands beyond 8.5%. [India ETFs: Bull or Bear?]
Additionally, India has been tackling an inflation rate of 10.55%. Observers note that the lack of skilled labor puts pressure on wage costs, along with prices of goods and services. The government also adheres to pro-cyclical fiscal policies that don’t efficiently help the economy. [4 Things Firing Up India ETFs.]
India’s Central Bank last week raised rates for the fourth time this year, raising concerns that the bid to stomp out inflation may stifle growth, according to AFP. The economy grew 8.5% in the last quarter, and is projected to grow that much this year. The government believes that double-digit growth is necessary to aid the 40% who are in dire poverty. [Two New India ETF Plays.]