Monday February 08, 2010
By Leonard Goodall, editor No-Load Portfolios
At the recent World Economic Summit in Davos, Switzerland, Blackstone's CEO Steve Schwartzman said that India was high on the firm's investing agenda.
He thinks it's a great country for global growth, and he expects an investment return of 20% to 30% over the next 3 to 5 years.
Schwatrzman notes that the Indian people are educated, smart and speak English, and the government is supportive of economic growth.
In recent years, India has been overshadowed by China, but India has its own advantages for investors. While the Chinese economy is heavily dependent on exports -- they make up 40% of its economy -- India's exprts account for only 18% of its economy.
Moreover, domestic consumption accounts for 57% of India's GDP compared to 37% for China. This means India isn't as dependent on the sluggish economies of North America and Europe for its growth. As the recession linders, India's growth will look comparatively better.
All isn't rosy in the elephant kingdom, however. Its transportation, communications, and energy infrastructure are atrocious. The country is also in need of finaical institution overhaul, a lossening of red-tape, and mroe deregulation.
The country also suffers from a lack of foreign direct investment as compared to China and other Asian countries. However, as India solves its infrastructure problems, it should attract more foreign money.
Investors in the Matthews India Fund (MINDX) has experienced a wild ride over the past three years. Investing in India is tricky. Nevertheless, dollar cost averaging over many years as India grows, or buying on major pullbacks for a rebound, are rational long-term investment strategies.
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