Time to Buy India ETFs on Likely Election Optimism?
India is setting a global benchmark with its forecasted annual growth rate of 7.3% for the fiscal year ending in March 2024, as quoted on CNBC. This impressive figure positions India as a leader among the major global economies. The timing is particularly significant as it precedes the national elections, offering a potential boost to Prime Minister Narendra Modi's campaign.
The National Statistical Office (NSO) has labeled these figures as preliminary projections for 2023/24. In a reinforcing move, the Reserve Bank of India (RBI) has upgraded its GDP growth forecast to 7%, an increase from its previous estimate of 6.5%. This revision strengthens confidence in India's economic trajectory.
Reflecting on recent achievements, India's economy expanded by 7.2% in 2022/23 and 8.7% in 2021/22, laying a solid foundation for the optimistic projections for the coming years.
Political Impact on Prime Minister Modi
Economists are closely monitoring the potential impact of this economic growth on Prime Minister Modi's re-election prospects. Sustaining a growth rate above 7% for a third consecutive year, particularly in a global slowdown context, could significantly enhance Modi's chances of securing a third term. Notably, Modi is viewed as a market-friendly leader.
Analysts’ Views
Rahul Bajoria from Barclays Investment Bank credits India's robust growth to effective government economic management, highlighting its resilience despite global economic weaknesses, as quoted on CNBC. S&P Global Ratings projects India as the fastest-growing major economy for the next three years, with expectations of it becoming the world’s third-largest economy by 2030, surpassing Japan and Germany.
Upcoming Budget and Fiscal Strategies
Finance Minister Nirmala Sitharaman is set to present an interim annual budget focusing on increasing infrastructure spending, supported by rising tax receipts, and targeting a reduction in the fiscal deficit. The government's expenditure is projected to rise by about 4% in 2023/24, with private investment expected to increase by 10.3%.
However, this is slightly lower than the 11.4% increase seen in the previous year. While private consumption is expected to grow by 4.4%, the manufacturing and construction sectors are forecasted to expand by 6.5% and 10.7%, respectively.
Concerns and Challenges
Despite these promising figures, concerns persist regarding the nature of this growth. Key sectors like IT and financial services, while driving growth, offer limited job creation for the rural poor. Additionally, the agricultural sector is expected to see a deceleration in growth.
ETFs in Focus
In the past month, India ETFs have offered a sturdy performance. Winning ETFs have been WisdomTree India Earnings Fund EPI (up 6.6%), First Trust India NIFTY 50 Equal Weight ETF NFTY (up 6.4%), Franklin FTSE India ETF FLIN (up 6.3%), Invesco India ETF PIN (up 6.2%) and VanEck India Growth Leaders ETF GLIN (up 6.1%) (as of Jan 5, 2024).
(Disclaimer: This article has been written with the assistance of Generative AI. However, the author has reviewed, revised, supplemented, and rewritten parts of this content to ensure its originality and the precision of the incorporated information.)
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WisdomTree India Earnings ETF (EPI): ETF Research Reports
Invesco India ETF (PIN): ETF Research Reports
Franklin FTSE India ETF (FLIN): ETF Research Reports
First Trust India NIFTY 50 Equal Weight ETF (NFTY): ETF Research Reports
VanEck India Growth Leaders ETF (GLIN): ETF Research Reports
