In the wake of his rock star reception at Madison Square Garden last Sunday, Prime Minister Narendra Modi emphatically announced to our nation’s top corporate and political leaders that India is now open for business.
Between September 26 and 30, he met with not only President Barack Obama and other high-profile politicians but also the CEOs of some of our nation’s largest and most successful companies: Google—which we own in both our All American Equity Fund (GBTFX) and Holmes Macro Trends Fund (MEGAX)—Boeing, PepsiCo and General Electric, among others.
The only thing missing was a ribbon cutting ceremony.
Although U.S. Global Investors typically doesn’t invest in India, the country has recently found itself in the driver’s seat of global resources demand and production. This is a tailwind for our Global Resources Fund (PSPFX), which maintains heavy exposure in the industries that India will increasingly need to support its more than 1.25 billion (and counting) citizens: oil and gas, chemicals, energy services and infrastructure, precious metals and food.
India’s culture is ancient, dating back more than five millennia, but it has a disproportionately young population. As the world’s second-most populous country, India is home to roughly 600 million people under the age of 25. That’s close to half of its own population and a little less than twice the entire U.S. population. Over the next few years, this one generation will largely be responsible for charting the country’s trajectory into its next stage of economic development.
As old as India’s culture is, millions of its citizens seek the contemporary American dream of opportunity and prosperity. They rely on their new leader, former tea merchant Narendra Modi, as their ambassador of “hope for change,” as he put it in his September 25 Wall Street Journal op-ed.
India Opening Its Wallet to International Sellers
At its current rate of population growth, the South Asian country will in the coming years be in need of biblical amounts of natural resources to meet the ambitious economic and social plans the newly-elected prime minister has laid out.
Among other goals, Modi envisions “affordable health care within everyone’s reach; sanitation for all by 2019; a roof over every head by 2022; electricity for every household; and connectivity to every village.”
The energy infrastructure alone will require staggering amounts of copper conductors, iron, electrical steel and oil. As I wrote back in May, Modi has a proven track record for bringing electricity to Indians who previously never had it.
The prime minister also asserts, “The number of cell phones in India has gone up from about 40 million to more than 900 million in a decade; our country is already the second-largest market for smartphones, with sales growing ever faster.”
China is currently the world’s largest smartphone market.
Most smartphones require a combination of many precious metals, minerals and other materials, including gold, aluminum, glass, steel, lithium and various rare earth elements you might never have heard of such as yttrium, praseodymium and dysprosium.
Since Modi’s election in late May, the consumer outlook index in India has risen nearly 8%. At 45.2, however, it’s still about five points shy of 50, the pivotal threshold that indicates, on balance, that more consumers perceive the economy to be improving.