India has outpaced China to become the world's most populous nation and the fastest-growing large economy, driven by a consumer boom and a young workforce. This shift comes as China faces a property crisis, with the World Bank projecting a growth rate of only 4.4% for next year, marking its weakest performance since 1990, excluding the pandemic period.
Global investors are pivoting from China to India in anticipation of higher returns. JPMorgan's estimates suggest that approximately half of the $250bn-$300bn invested in Chinese bonds since 2019 has been withdrawn, and foreign ownership of Chinese equities has decreased by over $100bn. In contrast, India attracted $15.5bn in foreign equity inflows during the first eight months of this year.
India's imminent inclusion in the emerging market bond index is expected to draw $30bn of foreign inflows into its government bond market. Anuj Arora, CIO at JPMorgan Asset Management, emphasized India's economic advantages compared to China's economic difficulties.
The demographic advantage of India is predicted to boost consumption from $2tn in 2022 to $4.9tn by 2030, surpassing China. Investors can tap into India's economy through ETFs such as the US-listed $6bn iShares MSCI India ETF or its $2.3bn Ucits version available in 16 European countries.
However, concerns remain that India's growth may already be reflected in its assets. The iShares MSCI India ETF yielded an 8.4% return over the past year, 48.9% over five years, and 126.6% over the past decade. Indian stocks pose challenges for foreign investment due to capital gains tax and foreign ownership limits. Despite these hurdles, long-term trends favor India's economic rise.
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