I want to achieve greater returns in 2023 after what was a challenging 2022 for many investors. With the UK economy likely to enter a recession this year, it might pay me to increase my exposure to fast-growing economies elsewhere in the world.
India’s economy is forecast grow at 6.1% in 2023 — the year in which it will become the world’s most populous nation. So, let’s take a closer look at India’s growth and how I could increase my exposure to this fast-growing state.
Growth with headwinds
India has more people within working-age groups than any other population group. This traditionally leads to something called a demographic dividend — a period of accelerated growth due to a low dependency ratio.
Demographic data suggests that India could have a golden period between 2020 to 2040. However, we shouldn’t take India’s growth for granted. The nation needs a healthy, educated, skilled, and economically active population.
And this is where some challenges may lie. Only a very small percentage (10%) of the labour force are employed in the formal economy, and education, particularly among women, isn’t geared towards employable skills. Furthermore, there are widespread health issues, including malnutrition and anaemia.
Despite this, Indian economic growth will likely exceed global averages in the coming years.
Should I be wary?
Investing in a developing nation does carry more risks than investing in the UK, even from the perspective of currency fluctuations.
This week, Asia’s now-former richest man Gautam Adani was accused of pulling “the largest con in corporate history“. His flagship company Adani Enterprise tanked. Adani’s market losses topped $100bn.
Adani’s empire is tied closely with many aspects of India’s economy. Will it have an impact on economic growth? It’s unlikely. But it is concerning that Adani’s mismanagement was allowed to happen. “Adani may have started a confidence crisis in Indian shares and that could have broader market implications,” said Ipek Ozkardeskaya, senior market analyst at Swissquote Bank.
So, it can pay to be wary.
Increasing my exposure to India
Despite the challenges this week, I’m still keen to increase my exposure to India, but only slightly. One of the best ways to do this through funds or trusts, as there isn’t a wealth of Indian stocks listed on the London Stock Exchange (LSE).
I already own shares in Jupiter India and Stewart Inv Indian Subcontinent Sustainability. To date, they haven’t provided me with great returns. That’s partially because both of them dipped this week as Adani’s empire tanked.
But naturally, there are other options. One that I’m looking to buy is the JPMorgan Indian Investment Trust. It’s the biggest Indian investment trust on the LSE by market cap, as such it the first point of call for many retail investors looking for greater exposure to India. However, its performance has been fairly disappointing.
There are other smaller trusts too, including Aberdeen New India Investment Trust and Ashoka India Equity Investment Trust. I’m also keeping a close eye on Franklin Templeton FTSE India, which looks to track the performance of the Indian index.
There’s no guarantee that these trusts will provide me with big returns, but, given India’s economic forecast, I’m keen to increase my exposure to the fast-growing nation.
