India’s economy expanded at its fastest pace in four years. However, investors who are interested in the country-specific exchange traded funds should keep in mind that the numbers are based off new accounting methods.
Year-to-date, the WisdomTree India Earnings Fund (NYSEArca: EPI) dipped 1.1%, iShares India 50 ETF (NasdaqGM: INDY) was 0.1% lower and PowerShares India Portfolio (NYSEArca: PIN) was up 1.8%.
India’s economy grew by 7.3% for the full fiscal year ended March, the fastest annual growth rate since 2011, the Wall Street Journal reports.
Observers attribute faster-than-expected expansion to investment-friendly policies enacted under Prime Minister Narendra Modi’s administration. For instance, manufacturing activity jumped 7.1%. Meanwhile, financial, insurance, and real estate services surged 11.5%. The below-average rains, though, are hurting crops, with agricultural growth inching up 0.2%.
The financial sector is a largest segment in both INDY and EPI, accounting for 24.1% and 26.5% of the ETFs’ holdings, respectively. PIN, on the other hand, only has a 10.3% tilt toward financials but a heavy 22.3% in energy.
However, potential investors shouldn’t grow too optimistic with the higher gross domestic product figures as the latest output numbers were helped by a controversial update to India’s official GDP-estimation methodology, which could have bolstered recent readings by over two percentage points.
“The official GDP data are overstating the strength of the economy, and probably by a significant margin,” Shilan Shah, an economist at Capital Economics Ltd., said in a report, according to Bloomberg.
Former Prime Minister Manmohan Singh also accused the government of juicing the numbers to hide a weak recovery.
Some are concerned with a number of other data, including exports and corporate profits, that still point to weakness in the economy. For instance, the latest government data revealed factory output at a five-month low and exports falling for the fifth-consecutive month. Additionally, bad loans are estimated to increase to a 15-year high.
“Is growth picking up?” Pranjul Bhandari, an economist at HSBC Holdings Plc, said in a note. “Depends on who you ask, what indicators you look at and, more recently, how much you buy into the new GDP series.”
PowerShares India Portfolio
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Max Chen contributed to this article.