Contents

Political and social context

Narendra Modi's leadership

Since coming to power in 2014, Narendra Modi has profoundly transformed India. His party, the Bharatiya Janata Party (BJP), has implemented ambitious economic reforms while adopting a nationalist approach. This policy has often been criticized for its systematic discrimination against minorities, particularly Muslims, and for its weakening of democratic checks and balances.

Economic performance

Economic growth

India's economic growth is impressive. In 2023, annual growth reached 8.2%, up from 7% the previous year. The IMF forecasts growth of 6.8% for 2024, one of the highest in the world. This performance is largely due to massive investment in infrastructure, particularly roads and ports. According to economists, India could even become the world's second largest economy by 2050.

Inflation and the stock market

Inflation fell to less than 5% in April 2023. The Indian stock market has become the fourth largest in the world, with a market capitalization of $4.3 trillion. These indicators point to a healthy economy, despite social and political challenges.

Social and economic challenges

Despite these successes, India faces significant challenges. GDP per capita remains low, at $2,410.9 in 2022, the lowest in the G20. The Human Development Index ranks India 134th in the world. Poverty and youth unemployment are persistent problems. Economic growth has not yet led to the emergence of a middle class capable of stimulating domestic consumption.

Investment opportunities

Technology Sector

Sino-American tensions have benefited India, with several major multinationals moving from China to Bharat. Many Western technology companies, notably Apple, have moved part of their production from China to India. In 2022, Apple transferred part of its iPhone production to India, increasing its global production share from 1% in 2021 to 7% in 2023. This trend is set to continue, with estimates reaching 25% in 2025. The two stock market indices (MSCI India and MSCI China) have followed completely different trajectories over the past three years (see chart below). The Chinese index (in red) has lost almost 50% over the period, while the Indian index (in orange) has gained over 60%.

Economic and Geopolitical Relations

India enjoys privileged economic relations with countries such as the United States, China, Bangladesh, Singapore, the United Arab Emirates, France, the Netherlands, the United Kingdom, Belgium and Germany. These partnerships offer diversified investment opportunities. India is also taking advantage of Sino-American tensions and the Russian-Ukrainian conflict to strengthen its economic position.

Infrastructure sector

Investment in infrastructure is a key driver of India's economic growth. The government has launched ambitious programs such as the National Infrastructure Pipeline and the National Logistics Policy. These initiatives aim to modernize the country's infrastructure and attract private investment.

Agricultural sector

Agriculture accounts for 15% of India's GDP and employs over 40% of the population. Although this sector faces challenges, notably due to weather conditions and dependence on imports, it offers investment opportunities in agricultural technologies and sustainable solutions.

India is one of the best countries in which to invest in the stock market. In fact, it accounts for 4.6% of the global stock market (in terms of the number of companies listed in 2012 with a market capitalization of over $50 million), but 20.4% of the 446 companies identified have achieved a performance of over 1000% between 2012 and 2022, i.e. 91 stocks. By randomly selecting an Indian company in 2012, you had a 3.6% chance of coming across a stock that achieved a stock market performance of +1000% ten years later. That's better than any other country, even the USA.

Challenges and risks

Import dependency

India is a net importer of energy resources, making it vulnerable to fluctuations in commodity prices. In 2022, the trade deficit with China reached $87 billion, underlining the country's economic dependence on Beijing.

Geopolitical tensions

Tensions with China and Pakistan remain a source of concern. Although border relations with China have remained stable since 2020, the threat of new conflicts persists. India also has to deal with internal communal tensions and separatist insurgencies in Jammu and Kashmir.

Social and economic inequalities

India is one of the most unequal countries in the world. The richest 1% of the population earns over 20% of total national income, while the poorest 50% earn just 13%. These social and economic inequalities can hamper long-term growth and provoke social tensions.

Conclusion

In 2024, India presents itself as a dynamic economy with significant investment opportunities. Robust economic growth, structural reforms and investment in infrastructure make it an attractive destination for investors. However, social, political and geopolitical challenges persist and require continued attention. For potential investors, India offers a unique blend of risks and rewards, with growth opportunities in various sectors, including technology, infrastructure and agriculture.

Going further: In a second part, we'll present a list of interesting stocks to take advantage of the Indian market boom .