Keeping a Close Eye on India's Improving Economy

Robert Hsu, September 01, 2009

I've got some good news about a country that has been on my "avoid" list for quite some time. Economic growth in India increased for the first time since 2007, posting 6.1% GDP growth in the second quarter. The country is now expected to post around a 6% GDP growth this year -- a respectable number considering the global economic slowdown.

The boost in India's economy is mostly due to the country's strong domestic consumption, which is helping spur India's economy forward -- much like what we've seen in China. Also similar to the Shanghai market is the Indian stock market -- up around 60% year to date.

Now, I've been avoiding India for some time for several reasons, primarily instability in their government and the two-year slowdown in India's economy. On the whole, India can be baffling -- when you visit, the country is a mess. Last summer, I visited India, and what I discovered is that the country has poor infrastructure, widespread poverty and a mostly poor educated population.

But despite this, their numbers look pretty good on paper. From 1997 to 2007, India has posted GDP growth of more than 7%. And in 2008, the country recorded 6.6% economic growth.

Still, I was very cautious about the possibility of investing in India after visiting the country last year. At that time, I felt India's inefficient government, poverty, uneducated populace and poor infrastructure would limit it from becoming a booming economy in the near future. And today, I still think that India has a way to go before reaching the level of economic success that China has achieved in recent years.

With that said, though, the political situation in India is beginning to stabilize, the country is moving away from socialism, it's focusing more on free enterprise and the economic outlook for the country is improving. Now, that doesn't mean we should dive head first into India. I'm still cautious and not fully convinced that India is the most profitable opportunity for us right now.

Plus, we must keep in mind that it's actually more difficult to recommend India-based stock investments because -- with the exception of the Indian IT outsourcing industry -- there are very few Indian companies listed on the U.S. exchanges.

But as market conditions improve over the next few weeks, I think it might be worth looking into India for some trading opportunities. And I'll be doing just that in my Asia Edge service. I don't want you to miss out if and when I recommend taking advantage of improving trends in India -- join Asia Edge today!

Sponsored Links

What's happening in the world's major foreign markets right now? Will current events affect the stocks in your portfolio? Read InvestorPlace Asia's Top Stories to find out everything you need to know in order to stay on top of global economic news.

more...

Every country has its own special customs and traditions. Being familiar with a country's culture can often make a difference in whether you gain or lose from investing in its stock market. Check out our culture section to learn more about the societies of the world's fastest-growing emerging economies.

more...

There's a lot happening around the world today, and it's important to know how it's affecting your investments. Watch the latest videos covering important Asia topics!

more...