(Commentary)

July 8, 2009 (FinancialWire) (Cross Border: U.S. India News Wrap) — Asian markets have shown stronger recovery in Q2/2009 and aspire for return to normalcy in Q3/2009. Having largely withstood the economic crisis better than Europe and America, many ask if a resurgent Asia will break free from the rest of the world. Some analysts predict that in the future, Asian funds will alienate themselves from the U.S. So often called developing and sometimes referred to as third world, at the June 2009 Morgan Stanley (NYSE: MS) conference held in Mumbai, fund managers were of the opinion that India is emerging ahead of China in the Asian investment destination. Their views are supported by improved operating margins, decreasing global commodity prices, falling labor prices. Increase in core sector demand for steel and cement hint at a broader economic recovery.

The “Gandhian Philosophy” promoting all things “Swadeshi”, which propagates in-house manufacture and a disregard for imports, went a long way in stabilizing the economy in its bleak British ruled era. In an age that advocates increased globalization and a high reliance on foreign trade, adoption of this philosophy is much more difficult and complex than it was in the abolishment and passive resistance era of the early 1900’s. Yet it is perhaps this ingrained philosophy among the Indian leaders (and a predominantly credit averse mentality among the masses and the conservative financial systems at large) that may have in some way have cushioned the country’s economy from a direct hit in the present financial crisis.

The Indian economy has behaved interestingly in the current global economic slowdown. While the global financial meltdown has no doubt affected it, it has proved more resilient than others. India’s own edge over China lies in its relative independence from Exports. The Indian Statistical office reported better than anticipated economic growth numbers in June 2009. According to a Citigroup (NYSE:C) Global Market report, India’s GDP growth estimate is 6.8% for 2009-10 and even better, at 7.8% for 2010-11. In the light of global figures where major economies like U.S. and UK have been recording negative GDP growth in 2009, these figures present an impressive picture.

A United Nations Conference on Trade & Development (UNCTAD) study finds FDI inflows into India in 2008 to have achieved over 85% growth at U.S.D 46.5 billion, the highest across all countries. In contrast, global flows declined from U.S.D 1.9 trillion to 1.7 trillion over the 2007-08 period. Moreover, the emergence of a single political power spells further stability for investors interested in India. As the 2009 Budget highlights a long term growth aspiration of 9% for National GDP and increased spending on infrastructure, it is a perhaps time to consider an Indian investment!

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