India is a rising star amongst international fund managers. Mirroring their faith in the Indian economy, overseas funds have infused a staggering $4.78 billion in the capital market in November2010 – taking the year-to-date total to $39 billion. Fund inflows in 2010 is going to be a record. According to data available with the Securities and Exchange Board of India (SEBI), net cumulative FII inflows as on November 10, 2010 from November 1992 was $101.25 billion.
Robust private sector and growing middle class are key drivers to India’s growth. However, high growth prospects could be hindered by poor infrastructure.
Major strengths of Indian economy, from the point of view of external fund managers, are mainly (a) Good growth prospects, (b) Moderately deep capital market, and (c) Adequate external liquidity. The main weaknesses are (a) Fiscal inflexibility due to high debt and large deficit and (b) Low per capita income.
In this context, here are some interesting facts about Indian economy
IMF, in 2010, ranked India as the 11th largest economy with a GDP of $ 1.430 trillion. It is interesting to note that India trails its BRIC peers (in fact, all of them!) – China is ranked 2nd with a GDP of $ 5.745 trillion, Brazil is ranked 8th with a GDP of $ 2.024 trillion and Russia is ranked 10th 1.477 trillion.
India has fifth largest international reserves in absolute terms at $ 297 billion (early October 2010) behind China, Japan, Taiwan and Russia.
India had a labor force of 467 million (2009 estimate by CIA – The World Fact Book) which is ranked second in the world. The unemployment rate estimated by the same source was 10.7%. The unemployment rate in USA at the same time was 9.3%.
Indian economy is more inward oriented compared with China’s export driven economy. India’s total exports as a percentage of fiscal 2009 GDP amounted to 18% when China’s exports amounted to 27% of its GDP.
India’s low per capital income (estimated by S&P at $ 1,073 in March 2010) presents both opportunities and challenges. India is rated as Investment Grade ‘BBB – ‘ with Stable Outlook by S&P. No other ‘investment grade sovereign’ has a per capita income of about $ 1,000, nor does any sovereign rated in the ‘BB’ category (i.e., one full notch of three sub categories below India’s rating) except Bangladesh (with Per Capita of $ 601) has a per capita income as low as that of India.