Winning the Nobel Peace Prize may be yet another feather in India’s cap, but the work of the victor, Kailash Satyarthi serves as a sharp reminder of the many problems that still plague one of the most important emerging market countries. Satyarthi is a crusader for erradicating child labor in India, an issue that’s a part of the long-term, structural issues many investors in India would want to see addressed, if not resolved, by the government of Prime Minister Narendra Modi.
Modi, whose victory rekindled excitement over India’s future and the investment opportunities it presents, is considered a reformer capable of getting India moving again. President Barack Obama, who met Modi on his recent and highly publicized U.S. visit, has said that India and the U.S. form “the defining partnership of the 21st Century.”
How do investors see that partnership, which has always been fractious, developing? What are their views of and expectations for an India under Modi? Here’s what a few of them have to say:
Sid Bhargava, Research Analyst, Matthews International Capital Management
Though some might argue that there’s a cyclical recovery in India that coincides with Modi’s win and that gives him a good platform, Modi is also viewed as an outspoken and strong person, someone who can get things done, and that compares favorably to the policy paralysis we saw with the last government, said Sid Bhargava, research analyst, Matthews International Capital Management.
“I guess the next question is how much reform do I see coming through, and I believe there’s a difference between dealing with the low hanging fruit and the deeper, structural issues, which are the long term issues that India has always faced,” he said. “I believe those must be addressed from a long-term perspective with respect to investment.”
As far as the “low hanging fruit goes,” Bhargava believes that Modi has made it fairly clear that he will deal with it. Broadly speaking, he wants to clear bureaucracy, remove government intervention and spur business, and “I believe those and other kinds of things are easy enough to do through a number of short-term policy measures, including reducing subsidies in fuel and even agriculture,” he said. Longer-term, however, and to attract sustained investment, there are structural issues, fundamental changes that need to come about in India. These include better revenue collection, which requires detailed, long-term policy planning, cleaning up the public sector banks, increasing employment in the organized sector and of course, reducing the great socio-economic inequalities that still exist in India. Those are the changes that will matter for India’s long-term development and whether Modi can actually effectuate them remains to be seen, Bhargava said.
Kurt Umbarger, Portfolio Specialist, T. Rowe Price Global Growth Stock Fund