India: An attractive investment destination

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A key destination for foreign investors

India is one of the fastest growing economies in the world and has emerged as a key destination for foreign investors in recent years. Over the last year, ETFs (exchange-traded funds) investing specifically in Indian equities such as the WisdomTree India Earnings Fund (EPI), the PowerShares India Portfolio (PIN), and the iShares MSCI India ETF (INDA), have largely outperformed ETFs investing in emerging market funds. These include the Vanguard FTSE Emerging Markets ETF (VWO) and the iShares MSCI Emerging Markets Index Fund (EEM).

From October 28, 2013 to October 27, 2014, EPI, PIN, and INDA gained 33.1%, 25.6%, and 25.1%, respectively. Meanwhile, the VWO and EEM lost 2.6% and 4.8%, respectively.

India etfs

Economic reforms have benefited India’s economy 

Economic reforms initiated in 1991 have grown in scope and scale, yielding increasingly good dividends:

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  • India’s relative position in the global economy has improved
  • India’s influence in international institutions and negotiating free trade areas has strengthened
  • Production efficiency in the economy has improved, and the country has adopted international best practices in the production of a range of goods and services
  • India was ranked among the top ten investment destinations beginning in 2007–08, attracting $195 billion in FDI (foreign direct investment) and $97 billion in FII (foreign institutional investment) over the past five years, according to Invest India

An attractive investment destination

Invest India is India’s official agency dedicated to investment promotion and facilitation. It’s set up as a joint venture:

  • Federation of Indian Chambers of Commerce and Industry, or FICCI – 51% equity
  • Department of Industrial Policy and Promotion, or DIPP – 35% equity
  • Ministry of Commerce & Industry – 0.5% equity
  • State Governments of India – 0.5% equity

Nearly two decades of economic liberalization, along with robust domestic demand, a growing middle class, a young population, and a high return on investment make India a credible investment destination.

Let’s take a look at how India’s boosted investments and growth by liberalizing its industrial policy.

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