India's growth makes it the star emerging market for investors

checking in: The Real Marigold Hotel has proved a TV hit but did not really show the countrys hive of industry. Picture: Vinod Singh

India celebrates its new year or Saka next Wednesday. It will be a day for rejoicing with many investors joining in the celebrations.

Viewers of the popular BBC programme The Real Marigold Hotel, now in a second series, will recognise the country but the nation’s hive of industry and emerging youthful talent were not revealed.

India is enjoying dramatic economic growth, estimated by the IMF at 7.2 per cent this year and by the country’s Central Statistical Office at 7.1 per cent. Compare that with 1.8 per cent in the UK, just over two per cent for Europe and 2.3 per cent for the US.

Such growth makes India the star emerging market, even surpassing the questionable claim that China is likely to grow by 6.5 per cent this year.

The forecast for India would have been even higher at 7.6 per cent growth had the Government’s decision to scrap high value currency notes – representing 85 per cent of the cash in circulation – in November not impacted.

To offset the problem, Prime Minister Narendra Modi has cut taxes for the less wealthy and small businesses and increased infrastructure investment by almost US$60bn.

Demonetisation should actually bring greater transparency and a more efficient economy, enhancing trade and ties with developed economies.

“India is one of the few equity markets I like. It’s an entrepreneurial society and the demographics are great with a young, mainly educated population and growing middle class,” says Juliet Schooling Latter, research director at Chelsea Financial Services. “Modi is very pro-business and reforms, whilst slow, have been positive.”

Martin Payne at wealth manager Brewin Dolphin in Leeds is encouraged by the reforms which include an ID programme enabling millions to open a bank account for the first time.

Yet he stresses that India should still be regarded as “a higher risk investment” but adds that for investors who are prepared to be patient and ride out periods of high volatility, “the long-term outlook appears to be rewarding”.

Three investment trusts specialise in India: Aberdeen New India, Indian Capital Growth and JP Morgan Indian. If the flavour of the country appeals but a lower exposure, Pacific Assets has 33.9 per cent, JP Morgan Emerging Markets 22.1 per cent and Scottish Oriental Smaller Companies 21.1 per cent.

Phil Wong, investment manager at broker Redmayne-Bentley, suggests savers gain exposure through both JP Morgan Indian, which saw a 17.4 per cent rise last year and is trading below asset value, and Alquity Indian SubContinent Fund for an ethical bias. The former favours the financial services and materials sectors.

With Alquity, a quarter of the manager’s fees are donated to the communities in which they invest. The fund also has exposure to the fast-growing economies of Pakistan, Bangladesh and Sri Lanka.