Global investors are keen on India as they want to diversify from China: Expert

The Russia-Ukraine war, the US banking crisis and the meltdown effect of the global volatility has so far not affected India's economic stability. While the RBI has consistently taken measures to keep the rupee competitive and the inflation rate under check, India could now be offering more value to global investors than China, Dubai-based financial expert, Gary Dugan, CIO at Dalma Capital Management shares in an exclusive interview with Republic.

Republic: What are the key factors that have kept India insulated from the global economic turmoil so far?
Gary Dugan: The Indian economy has remained relatively insulated from global geopolitical and financial crises due to its own strong growth dynamics. The ongoing transformation of the country through heavy investment in infrastructure is enabling a large and growing population to generate good growth almost irrespective of global dynamics.

Republic: What impact of the Fed rate increase do you foresee on India?
Gary Dugan: The Indian economy is used to high interest rates and inflation hence when the global economy had its shock from higher inflation and rate rises this was something that India could easily absorb. The only concern for India would be if higher US interest rates led to a surprise fall in the value of the INR. To date that has not been the case. Indeed, with US interest rates looking  like they may be close to peaking the potential challenge to India may be in the rear view mirror.

Republic: Indian inflation too is on correction mode - how will it now impact consumer spending?
Gary Dugan: Indian inflation looks to be on a downward path after peaking close to 8.0%. The fall in inflation will come as welcome relief to households who were paying ever higher prices for everyday needs such as food. Less inflation helps consumers as it improves their ability to spend more particularly If they are receiving decent wage growth. We would see the abatement of inflation as helping the consumer durables sector such as autos.

Republic: How is the Indian macro-economics environment currently in your opinion and do you think it is of interest for investors?
Gary Dugan: The Indian economy was making great strides in its ongoing development particularly with respect to the massive investment in infrastructure which enables it to be much more competitive in the manufacturing and service sectors. The trend for global companies to diversify their sourcing away from China should benefit India. India’s competitive position should be helped through the ongoing improvement in logistics, road and power networks. Given the rather insular behaviour of the authorities in China international investors are keen to invest in India for its ongoing materially better growth prospects and deepening of its industrial bases.

Republic: What are the major growth drivers (industry wise) in India now?
Gary Dugan:The growth avenues for India are multiple. Here are the major avenues.
Healthcare, and pharmaceuticals: The ongoing population growth and building middle class provides a significant opportunity for the healthcare sector as it upgrades its provision of services across the country and middle classes go in search of upgraded services. The pharmaceutical industry is already a global leader ranking number three in the world and should benefit still further with the growth of ageing populations in the west.
Fintech: Demonetisation some years ago put India on a path of tech enabled provision of financial services. Indian has one of the fastest growing fintech industries in the world with more than 2,000+ fintech start ups and a market that is expected to grow to USD150bn by 2025. The industry has also been well funded by foreign direct investment.
Technology: India has one of the most tech savvy populations in the world with high usage of the internet. With global companies seeking to diversify their global sourcing of technology, Indian industry and workers have the capacity and skill set to match the international needs for tech manufacturing, software development particularly in AI and data management.
Renewable energy: India’s still significant reliance on international sources of energy such as oil is the economy’s Achilles heel. The development of its renewable energy sources is a key focus of the government. The Indian government is providing significant support for the build out of ultra-mega solar parks, offshore wind farms and the development of new energy sources such as bio-energy. India is already the world’s largest consumer of electricity and the world’s third largest renewable energy producer.