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Faber: Don't Ignore India
02/15/2010 12:01 am EST
The rising Asian powerhouse is adding middle-class consumers at a heady pace, writes Dr. Marc Faber of The Gloom Boom & Doom Report.
I found it remarkable that at a recent Barron’s roundtable discussion in New York where a number of prominent strategists and portfolio managers had gathered, India—the world’s second-most populous country, with more than a billion people and an economy that is growing at around 8% per annum—wasn’t mentioned once.
In the year to March 2009, India added 125 million mobile phone subscribers! And whereas Indian auto sales are tiny compared to China’s vehicle sales (running currently at an annual rate of over 12 million units and up over 90% year on year), they are nevertheless up 39% year on year, with an annual rate of 1.6 million sales.
India’s middle class is estimated at 170 million (half the population of the US), and the country has one of the lowest vehicle-penetration rates in the world. Given that India also has one of the youngest populations—half of its 1.1 billion-plus people are less than 25 years old, compared to 42% in Brazil, 36% in China, and less than 30% in the developed nations—car sales will undoubtedly continue to soar in the next few years. In this respect, we should also take into account that India’s population will continue to grow rapidly and will exceed China’s population before 2030.
McKinsey estimates that by 2025, India’s middle class (households with disposable incomes of from 200,000 to one million Rupees a year) will increase to close to 600 million people, or more than 40% of the population.
This is not to say that India is free of problems. Its rapid population growth will be challenging. India’s land mass is only a third that of China or the United States, yet its population will exceed 1.4 billion in 20 years’ time. With close to 20% of the world’s population, India has just 4% of the world’s water resources and is likely to suffer in future from water scarcity.
Tensions between India and China [could increase over disputed Himalayan territory and] also in the Indian Ocean, where China has been involved in a number of port development projects.
Individual investors may wish to invest in New York-listed Morgan Stanley India Investment Fund (NYSE: IIF) or individual companies such as Infosys (Nasdaq: INFY) and ICICI Bank (NYSE: IBN), a very well-managed bank.
I should stress that I am far from certain about current stock prices providing an ideal entry point; however, given the country’s size and economic potential, investors who either have no exposure to India’s economy and vibrant corporate sector or are massively underweight Indian stocks should gradually become more involved in this promising country.
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