Top Reasons Indian Election Is Important to Global Investors

2. Potential for Expansion

For many years, India rose and shone in the global economy, but according to Sunil Asnani, lead manager of the Matthews India Fund, the macroeconomic challenges it has faced in recent years have been mostly self-inflicted, and can be fixed, given the political will.

Despite these challenges (including a weaker Indian rupee) however, export-oriented companies have benefited and companies in sectors such as consumer staples have managed to do just fine, thereby giving Matthews good investment opportunities.

“Once reforms are initiated, the potential for more [investment] opportunities will expand,” Asnani said.

India is unique because of its demography, culture, education and large working population, said Pavan Bang. “If the government machinery breaks down, foreign investment may dwindle in India, but Indians will still prosper within India,” she said. “The exports may come down, but there is a huge domestic market and enough work for all those who want to work.”

3. Frontrunner Has Good Track Record

Formal polls and word on the street thus far indicate that Narendra Modi, who heads the opposition Bharatiya Janata Party, is the frontrunner to become India’s prime minister. Modi has served as chief minister of the state of Gujarat (where Mahatma Gandhi was born) since 2001, and arguably under his leadership that state prospered and managed to maintain economic strength despite the troubles the rest of India has been facing. 

In light of a likely victory for Modi, the benchmark India indices have gone up significantly in the past month. Modi is seen as being pro-business and investors are hoping for a stable and decisive government under his leaderships

“Modi’s remarks thus far – he’s said that foreign investors are welcome to India if they create jobs, bring in assets and niche technology – have been viewed as very positive, and he has a track record for being a great administrator and executor,” Lalwani said. “However, execution is not easy in India and even for someone who has the ability to implement decisions, actually bringing the necessary reforms to fruition could prove a challenge without the right support.

All the same, Lalwani said it’s important to highlight the fact that in the 67 years since India’s independence, the transfer of power between successive governments has always been smooth. India has never defaulted on its international obligations and for whatever pressure there has been on the Indian rupee and on the economy, the Reserve Bank of India has not imposed capital controls – something that happens in other emerging market countries.

“These are very important factors that investors should bear in mind, as they remind themselves that no new government will be able to effect change overnight,” Lalwani said.