The Challenges Ahead
Despite all of the good news, India faces many economic and political challenges that must be overcome before it can truly take off and achieve legitimate powerhouse status. According to the World Bank Group, the country ranks 134 in its Ease of Doing Business 2014 Rank, just below Yemen and Uganda. And out of 144 countries, India ranks 71 in the World Economic Forum’s recently-released Global Competitiveness Report 2014-2015, scoring 4.21 out of 7.
Tortuous trade barriers, which Modi has expressed his resolve to liberalize, still hinder constructive international business dealings. Gold import duties remain in effect, which has allegedly led to an increase in smuggling.
Also, although India’s manufacturing sector in September showed modest growth for the eleventh consecutive month, the pace at which it grew is the slowest we’ve seen since December 2013. For the first time since March, the one-month moving average for the country’s purchasing managers’ index (PMI) crossed below the three-month. This move contributed to the J.P. Morgan Global Manufacturing PMI’s recent cross below the three-month, which, as I discussed recently, could be a headwind for commodities and commodity stocks.
But such challenges don’t appear to daunt the new prime minister.
“India is going to march ahead at a very fast pace,” Modi told his nearly 20,000 attendees at Madison Square Garden on Sunday. “The 21st century will be that of India. By 2020, only India will be in a position to provide workforce to the world.”
We at U.S. Global Investors wish Prime Minister Modi, his new government and the 1.25 billion Indians all the best.