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Manulife Investment Management highlighted that future wealth creators in different sectors will emerge from disruptors leveraging the transformed landscape and traditional incumbents, as stated in the company’s Transitioning to India’s next stage of growth’ report.
The primary drivers of digitisation that support the formalisation and reinvestment policies underpinning manufacturing expansion are well embedded in India’s economic growth agenda, it said in the report.
Rana Gupta, Senior Portfolio Manager, Manulife Investment Management said the effect of formalisation of the economy is starting to show results with visibly improved capital expenditure, industrial order books, narrowing current-account deficit and a healthier inflationary picture.
“We believe that the structural reforms will make India a more efficient, productive and resilient economy. The strong primary growth drivers create multiple new themes and investible opportunities that could be potent wealth creators for investors,” said Gupta.
“The structural reforms and policy support have been helped by low external debt plus strong household, corporate and government balance sheets. The conservative RBI is preventing the build-up of excess in the system to protect the currency outlook and has kept foreign-exchange reserves strong,” he said.
Macro resiliency has also underwritten the strength of foreign and domestic flows and valuations. Cyclically, India’s macro setup also looks robust with favourable growth, inflation and external-account dynamics.
Manulife Investment Management believes the latest GDP print was ahead of expectations, driven by substantial investments and is in line with the economic agenda. “The current account deficit has moved to near zero, and the balance of payments was positive in the last two quarters,” he said.
Moreover, a strong services trade surplus supports the current account as global companies increase their presence in knowledge-based outsourcing and consultancy services segments.
Also, capital flows remain strong as overseas investors are keen to participate in the Indian growth story, which helps the country’s overall balance of payments.
“We expect India to bolster its share of emerging-market flows as its medium- to long-term growth story remains strong,” the report added.
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