Why India could be in a sweet spot

The consensus is that India's growth story has twenty years to run, but Jupiter India fund manager Avinash Vazirani argues that right now, several factors have converged to create an investment 'sweet spot' for the emerging market giant.

Vazirani, who has just returned from a trip to the sub-continent, says that the Indian government is boosting its coffers with higher-than-expected tax revenues - even compared to forecasts from just four months ago - and has made meaningful forays into cutting its national budget deficit.

Huge increase in infrastructure projects

Above all, Vazirani has been struck by the speed and proliferation of infrastructure projects in the last few weeks and months and says this, rather than the domestic consumption story, could be ready to dominate economic growth in the months ahead.

Goldman Sachs estimates that India's young population demographic could add an extra 4% to GDP annually over the next 10 years as the workforce swells. Vazirani predicts that this, combined with an explosion in infrastructure projects over the last few months, could see that figure go higher.

He told Citywire: 'The last few years has been about  a domestic consumption story. Now infrastructure is the next pillar.'

Vazirani says the domestic consumption story will still continue as the middle classes continue to grow, but that it will be overtaken in the medium term by the infrastructure boom as the key economic growth driver.  

He sees very few parallels around the globe either, and in the other three Brics at least , the tender process is arguably less democratic.

Totally capitalist process

'In India this is a totally capitalist process. Every highway is a toll road and every port, airport and metro system is a private public initiative (PPI).

'There are huge, palpable changes that have taken place since my previous visit, which was only last February. New metro systems, railway lines, ports, power plants, roads and airports are appearing at an unprecedented rate.'

'In the last six months the whole landscape has changed. Even new cities are being created by the private sector and that is not being done anywhere else.'

He cites Delhi's new airport-the third largest in the world- as a good case in point.

The new international Delhi airport has been built by the government but is using private contractors. It was opened a few days ago having taken just 33 months to complete from start to finish.