# Demographics and fast-paced reforms make India our top EM pick
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2018-05-14
Category: NEWS
Category URL: https://financedigest.com/category/news
Meta Title: Why Invest in India? Demographics and Reform Drive Growth
Meta Description: Discover why India's demographic story and pace of reform make it a compelling investment opportunity for the future. Learn more here.
URL: https://financedigest.com/demographics-and-fast-paced-reforms-make-india-our-top-em-pickhtml

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**Jaisal Pastakia**, Investment Manager

India has a big demographic story, which is among the reasons why it stands out for us, and why it is the largest single country overweight within our emerging markets (EM) equity allocation. Globally, India is one of the few large economies where working age population growth is still positive; you might call that its ‘demographic dividend’. With a growing and aspirational middle class, this bodes well for lifting future [productivity rates and boosting consumption](https://www.financedigest.com/animal-feed-additives-market-regional-industry-segmentation-analysis-by-production-consumption-revenue-and-growth-rate-by-2031.html "Animal Feed Additives Market Regional Industry Segmentation, Analysis by Production, Consumption, Revenue and Growth Rate by 2031"). Because of this, some estimates suggest that India’s nominal gross domestic product growth could double by the [next decade](https://www.financedigest.com/the-next-decade-to-see-the-humanized-liver-mice-model-market-detonate-innovation.html "The Next Decade To See The Humanized Liver Mice Model Market Detonate Innovation").

Another compelling reason for our positive stance on India – and in our analysis this carries even more weight than the demographic advantage – is the pace of reform. Stronger and [higher quality growth](https://www.financedigest.com/short-bowel-syndrome-market-higher-growth-rate-forecast-2020-2030.html "Short Bowel Syndrome Market Higher Growth Rate & Forecast 2020 – 2030") will only be secured through meaningful structural reform to India’s economy. In this regard, we believe that [Prime Minister](https://www.financedigest.com/factbox-who-will-replace-uk-prime-minister-boris-johnson.html "Factbox-Who will replace UK Prime Minister Boris Johnson?") Narendra Modi’s reform agenda outpaces other EM countries.

[Investment opportunities](https://www.financedigest.com/an-analysis-of-vc-investment-in-the-defence-sector-and-the-mods-readiness-to-exploit-digital-opportunities.html "An analysis of VC investment in the Defence sector and the MOD’s readiness to exploit digital opportunities") in domestically-focussed companies

Brazil, for example, remains a constant source of frustration for [investors due](https://www.financedigest.com/a-digital-first-world-means-investors-should-look-to-digital-due-diligence-first-too.html "A digital-first world means Investors should look to digital due diligence first too") to a troubled political scene. Elsewhere, South Korea and China are making headway with implementing reforms, but the longer-term [positive impacts remain](https://www.financedigest.com/automotive-glass-market-to-witness-sales-slump-in-near-term-due-to-covid-19-long-term-outlook-remains-positive.html "Automotive Glass Market to Witness Sales Slump in Near Term Due to COVID-19; Long-term Outlook Remains Positive") to be seen. India is more advanced in its reform cycle and, having come through some short-term disruption, is now starting to bear the fruits of [Prime Minister](https://www.financedigest.com/liz-truss-resigns-after-six-weeks-as-uk-prime-minister.html "Liz Truss resigns after six weeks as UK prime minister") Modi’s reform agenda, with increased efficiencies and demand. We think that this [creates interesting opportunities for investors](https://www.financedigest.com/could-the-surging-build-to-rent-market-create-emerging-opportunities-for-investors.html "Could the surging build-to-rent market create emerging opportunities for investors?"), particularly at the domestic level, and are therefore focusing on the medium-sized company sector which is more domestically exposed.

The government has implemented wide-ranging reforms (fiscal, land, [labour market](https://www.financedigest.com/spains-labour-market-resilient-as-unemployment-drops-in-nov.html "Spain’s labour market resilient as unemployment drops in Nov") and transport), which are helping to formalise the economy. One of the most impactful measures has been the Goods and Services Tax, which was introduced in July 2017. The tax effectively creates a pan-Indian [common](https://www.financedigest.com/common-tax-deductions-and-credits.html "Common Tax Deductions and Credits") market through the harmonisation of state and central government taxes. Changes to the tax regime are [expected](https://www.financedigest.com/explainer-india-g20-presidency-2023-what-does-it-mean-and-what-can-we-expect.html "Explainer-India G20 presidency 2023: what does it mean and what can we expect") to lead to a meaningful pick-up in growth, as well as efficiency gains in areas like logistics. Elsewhere, reforms to promote greater financial inclusion have meant that over 300 million new [bank accounts](https://www.financedigest.com/lebanese-bank-closes-over-30-british-held-accounts-after-uk-ruling-depositors-group.html "Lebanese bank closes over 30 British-held accounts after UK ruling-depositors’ group") have been opened and over 229 million debit cards have been issued. After a period of economic disruption in the middle of 2017, activity data has now improved with industrial production output, credit flows and [car sales](https://www.financedigest.com/uk-new-car-sales-rise-in-november-fail-to-zoom-past-2019-levels-smmt.html "UK new car sales rise in November, fail to zoom past 2019 levels- SMMT") seeing strong improvements in recent months.

Strong improvement in [industrial production](https://www.financedigest.com/carlsbergs-poland-unit-could-stop-production-lack-of-co2-threatens-food-industry.html "Carlsberg’s Poland unit could stop production; lack of CO2 threatens food industry") since mid-2017

[India Industrial](https://www.financedigest.com/airbus-pledges-deeper-industrial-ties-with-india.html "Airbus pledges deeper industrial ties with India") Production price (YoY)

![chart](http://www.financedigest.com/wp-content/uploads/2018/05/chart.jpg)

Past [performance is not a reliable indicator of future](https://www.financedigest.com/sports-and-athletic-insole-market-players-eye-custom-and-3-d-printed-products-for-performance-optimization-says-future-market-insights.html "Sports and Athletic Insole Market Players Eye Custom and 3-D Printed Products for Performance Optimization, Says Future Market Insights") results. Source: FactSet

[Rising oil price](https://www.financedigest.com/oil-prices-rise-as-weaker-dollar-offsets-china-covid-19-concerns.html "Oil prices rise as weaker dollar offsets China COVID-19 concerns") raises some uncertainty

Currently, [rising inflation](https://www.financedigest.com/greek-eu-harmonised-inflation-rises-in-september.html "Greek EU-harmonised inflation rises in September") in India is not a concern. But investors should be mindful of a significantly [higher oil price](https://www.financedigest.com/wall-street-set-to-open-higher-oil-prices-extend-losses.html "Wall Street set to open higher, oil prices extend losses"). Indian imports around 80% of its oil and the international oil [price](https://www.financedigest.com/eu-sees-more-work-ahead-to-implement-russian-oil-price-cap.html "EU sees more work ahead to implement Russian oil price cap") is now approximately 50% higher versus last summer. This has also brought one of the country’s past difficulties – its current account deficit – back into sharp focus and we expect that the [central bank](https://www.financedigest.com/marketmind-rba-shock-hike-starts-huge-week-for-central-banks.html "Marketmind: RBA shock hike starts huge week for central banks") will be watching this closely.

Equity [market underpinned by domestic growth](https://www.financedigest.com/multi-functional-point-of-care-testing-market-growth-analysis-opportunities-trends-developments-and-forecast-to-2028.html "Multi-Functional Point Of Care Testing Market Growth Analysis, Opportunities, Trends, Developments, And Forecast to 2028")

We ultimately believe that the Indian equity [market is distinct from other major EM countries for its overwhelmingly domestic focus](https://www.financedigest.com/unicredit-focused-on-internal-delivery-open-to-ma-in-all-its-markets.html "UniCredit focused on “internal delivery”, open to M&A in all its markets"). This characteristic should allow investors to capture specific local [growth drivers](https://www.financedigest.com/automotive-balance-shaft-market-competitor-analysis-winning-strategies-and-growth-drivers-2025.html "Automotive Balance Shaft Market Competitor Analysis, Winning Strategies and Growth Drivers 2025"). Relative to other emerging equity markets, India has higher weightings in financials, healthcare, [consumer discretionary and consumer staples](https://www.financedigest.com/consumer-staples-banks-lift-uks-ftse-100-after-sharp-selloff.html "Consumer staples, banks lift UK’s FTSE 100 after sharp selloff"), and a lower exposure to technology – making it a stand-out from its Asian peers. An allocation to Indian equities can, therefore, offer [portfolio diversification](https://www.financedigest.com/investment-portfolio-diversification-why-its-important-and-how-to-do-it.html "Investment Portfolio Diversification: Why It’s Important and How to Do It") within a broader EM allocation.


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