India remains a bright spot amidst the challenging outlook for global growth

“India remains a bright spot amidst the challenging outlook for global growth. The IMF forecasts the country’s GDP growth will exceed all emerging and developed economies in 2023, at 6.1% versus 4.4% for China, 1.0% for the U.S. and 0.5% for the euro area. India’s growth is supported by several catalysts, including a rising middle class, a potential surge in manufacturing output, and demand for talent in the IT sector.

“India’s manufacturing sector is gaining significant momentum, which has attracted investors looking to diversify from China. Riding on the China +1 Strategy, where global manufacturers set up production bases in countries in addition to China, India has seen positive results including investments from Foxconn and Wistron in recent years. The rise of India as a manufacturing hub also extends to new industries and products.

“India was one of the better performing markets in 2022, driven by resilient earnings growth, supported by a recovery in domestic consumption, as well as the availability of cheaper energy, relative to other EMs. Corporate earnings are expected to continue to grow. Recent declines in commodity prices bodes well for inflation, and unlike other markets the outlook for labour and service inflation is muted.

“Longer term-fundamentals for India remain robust given increasing penetration of consumer goods, the growing formalisation of the economy, and a stable government. India is home to companies with exposure to long-term secular growth themes including digitisation and premiumisation. It also offers access to growing companies leveraging its consumption and infrastructure.”

Chetan Sehgal, Lead Portfolio Manager, Templeton Emerging Markets Investment Trust (TEMIT)