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Wednesday, June 02, 2004 |
 Outsourcing has allowed India to emerge as an economic powerhouse and open up to foreign investors. Economic growth rates are around 8% in gross domestic product (GDP) in the year to March 2004, of which only about 1.5% was due to favorable monsoon season.
The key to looking at any of these statistics is not the actual figures itself, but how they are placed against population growth. The fact that GDP is now considerably faster than population growth, gives an economic boost in all aspects of Indian economies. From an investor stand point; these figures alone spark keen interest. As each year economic growth succeeds, more and more Indians are leaving small villages and entering into a cash economy.
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India has successfully been able to capitalize on their large brain trust (educated, English-speaking, hard-working, non-demanding, cheap labor force). But to a foreign investor or even an ABCD who may know close to nothing about the Indian economy, these movements are not enough of an indicator of India’s economic growth.
The strength of any economy lies in its banks. If banks cannot fund growth opportunities, there is no strengthening of the economy. For those still skeptical in investing in India, HDFC Bank (NYSE: HDB) reported net profits were up over 31% and their revenues by 41%. ICICI Bank (NYSE: IBN) reported that retail loans shot over 75% over the past year.
Overall earnings per share from the entire Indian banking industry were up by over 25%. Thus, the invest-able sector of the Indian economy is opening the way for the economy to grow as a whole. And right now is the perfect time for foreign investors to take a closer look at Indian-based companies and capitalize in on this trend. |
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