India's Overshadowed Potential

Robert Hsu, February 24, 2009

Of all the Asian countries feeling the effects of the global economic crisis, India is definitely experiencing once of the hardest hits.

Many investors–me included–are optimistic about India's economic potential. It was even recently reported that India's government officials expect the country to post 7% GDP growth this year. But the reality is that India's economic growth will clock in at no more than 3% in 2008.

And the high potential that so many investors believe the country has? It is being dwarfed by major economic problems in the country. This is deterring investors from putting their money into this emerging country, which has caused India's currency to devalue, Indian businesses to suffer and employment to dwindle.

But in a country with so much promise, how is it so easily crumbling underneath the pressures of the global economic crisis? This is because, while other nations are proposing economic stimulus to overcome the crisis, India's less-than-competent government is turning to protectionism. And protectionism is dangerous because it creates retaliation from other countries, and the anti-trade sentiment can lead to a trade war.

You see, the Indian government is becoming politically unstable as it faces extreme challenges from opposition. And to make matters worse, India's capable Prime Minister Mamohan Singh, the 76-year-old chief architect of the country's economic reform, is hospitalized after undergoing heart surgery. And his possible retirement or death may further destabilize the country.

Now, while my views on the country right now are slightly negative, I am not bearish on India. That's because, as I've already mentioned, I think the country has a lot of potential and may soon see brighter days. But for right now, India has many economic and political issues to work out, which makes it a shaky investment for us.

Until then, I recommend that we invest in countries that are very likely to outperform, like China. To learn about my top trades to profit from China's economic emergence -- which will likely bring other Asian countries out of recession -- become a member of Asia Edge today.

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