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Why India’s Stocks Deserve Your Attention (Part 1)

19 October 2007 - Features - Editor

South-East Asia has awoken decisively from centuries of colonial obligation. Large domestic populations, nuclear arsenals, and physical proximity to China, and suspected bases of insurgent activities, make South-East Asia a politically sensitive part of the world. Big business often follows geo-politics, and South-East Asia has not been an exception to this phenomenon. Some countries in this area enjoyed spectacular GDP growths towards the end of the 20th century, but their blazing trails were catastrophically short-lived as international investors suddenly abandoned stocks in these countries.

India is different: the country was built on a Soviet or socialist model, with public-sector dominance, until the beginning of the 1990s. Under World Bank prodding, and as a result of the Soviet Union collapse, India has moved towards a free market system. It has enjoyed unprecedented economic growth since then, and has emerged as a major focus of international investor attention. There are concrete reasons why India will not go the way of some other South Asian economies and collapse abruptly. Foreign investors, who chase India stocks with such fervor, are likely to stay in the country. Why is this relatively new country such an attractive financial destination?

The Durable Foundations of India Stocks

An important distinction between India and other countries in the region is the abundance of varied natural resources. India is an established coal producer, but it also has vast off-shore natural gas and fossil fuel resources. Similarly, the land is blessed with vast tracts of arable land, below which lie minerals of strategic importance. Overall, the country has an amazing wealth of basic resources for industrial activities.

The median age of the more than 1 billion Indian population is less than 25 years. The literacy ratio may not be very impressive at just over 60%, but English is widely spoken and understood. The country has a vast reservoir of human talent with higher education in a variety of disciplines. India has a definite strength in terms of skilled and knowledgeable human resources.

India is a federal republic with a stable though vibrant political structure. Legislative changes for the support of business can take time, but foreign investors can rely on continuance of basic policies regarding economic development and regulation. The move towards a free market economy is said to be irreversible. The country also has a structured legal system based on common English law.

Natural resources, a skilled English-speaking population, and powerful political and legal infrastructure create nearly ideal conditions for private enterprise. Stocks of companies listed on India’s modern Exchanges represent long term values, and it is now one of the most attractive destinations for private capital anywhere in the world.

Why India’s Stocks Deserve Your Attention (Part 2)

 


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