Planes, Trains and Automobiles
As population mounts and business and manufacturing activity increases, India’s need for additional cars and trucks has accelerated this year. Vehicle production uses not only many of the materials already mentioned but also palladium, lead, zinc and others.
India, the world’s largest importer of weapons, also has its eyes on American-made military aircraft—more than $3 billion worth. The Asian country is already the U.S.’s leading defense market, and companies such as Boeing, Lockheed Martin and Sikorsky are no doubt pleased to hear that Modi’s government is committed to ramping up its defense spending.
According to the Wall Street Journal, among the possible purchases Prime Minister Modi discussed during his visit to the U.S. were 22 Apache attack helicopters, 15 Chinook heavy-lift helicopters and 24 Harpoon anti-ship missiles.
Going Long in India
Many economists and pundits have already likened Prime Minister Modi’s transformative pro-business position to that of Ronald Reagan and Margaret Thatcher—and his media darling status to that of Barack Obama circa 2008.
Even before Modi’s election, India was drawing the attention of global investors seeking growth and opportunity. Last month the portfolio manager of our China Region Fund (USCOX), Xian Liang, had the pleasure to attend a presentation in Hong Kong by CLSA’s Chris Wood, recognized as the one of the best strategists in Asian markets. During his speech, Wood maintained that India has been and continues to be his favorite market in the region, now more than ever since Modi’s ascent:
“I have, in fact, allocated 41% of my long only portfolio to India… I am not going to pull out because I am viewing India as a five-year story given the fact that Modi has been elected for five years. Modi is the most pro-business, pro-investment political leader in the world today.”
Wood went on to argue that among the four BRIC countries—Brazil, Russia and China included—India is the best place for investors to be right now.
But with Brazil’s economy limping along at less than a 1% growth rate and Russia’s wounded by international sanctions, it’s hardly an intellectual feat to declare India the BRIC country with the greatest potential.
The chart below places India in context with other emerging Asian countries. As you can see, whereas the economies of China, Indonesia and the Philippines are flat or slowing, India’s is growing rapidly and projected to have a 7.2% growth rate by 2016, a 60% jump since 2012.
With Modi actively seeking partnerships with some of America’s largest companies, it appears more and more likely that India can realize this optimistic growth rate.