India and Infrastructure

06/04/2015 9:29 am EST

Focus: ETFs

India is the world's largest democracy—one that voted in pro-business leadership in the form of the Narendra Modi government—notes Christian DeHaemer, editor of Energy & Capital.

It is arguably the first pro-business government in India's post-independence history. Further, India is a major beneficiary of low oil prices.

According to Bloomberg, the drop in Brent is a gift that could give Prime Minister Narendra Modi the room needed to step up infrastructure spending as he prepares the 2015 budget.

The International Monetary Fund added to the euphoria by forecasting India will become the world’s fastest-growing major economy by March 2017.

The IMF recently came out and said that India's gross domestic product is likely to grow at 6.3% (marginally down from the 6.4% projected in October) in the next fiscal year and 6.5% in the year to March 2017.

The Indian Finance Ministry was even more bullish and said GDP could hit 8.5% this year.

The World Bank has echoed this idea and said that India's growth will eclipse China's by 2017.

Part of this is due to a slowdown in China and part of it has to do with the slow and chaotic muddling through of the Indian economy. India has a lot of problems, but a centrally planned economy isn't one of them.

Totalitarian states can get the trains to run on time…for a while. But nothing beats a free market democracy for price and demand discovery. It looks like a mess, but it works.

India has been slowly (and I mean slowly) opening up its markets for the past 20 years. With the new government, change is accelerating, and the payoff is here.

The new government is spending money on infrastructure, cutting red tape, and reducing interest rates.

The government plans on increasing infrastructure spending from 6% of revenues to 9% with five ultra-mega power projects, as well as new tax-free bonds for roads, rail, and irrigation.

I've recommended India's largest private bank, ICICI (IBN) based on general growth. But another investment opportunity you might want to look at is the EGShares India Infrastructure ETF (INXX).

If you've ever been to India, you know they have some of the world's worst roads. Heck, they still make gravel by hand with a pick.

INXX is an exchange-traded fund geared to track the performance of Indian infrastructure companies, with the industrial engineering sector comprising 19% of the fund and the electric utility sector coming in second at 18%.

The exchange-traded fund currently has $50 million in assets and a 0.85% expense ratio. It has a P/E of 16 and trades at $12.95. Buy it.

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