India is overheating, but it has huge long-term potential – MoneyWeek

Coreinflationisrunningat8%andtheFTnotesthathotelmanagers’salariesareforecasttoriseby50%thisyear。

Higherlabourcostsaredentingcorporateprofitability。

Thegovernmentisalsolikelytoexceeditsspendingtargetforthisyear,whilearisingcurrent-accountdeficitalsopointstocontinuedoverheating,saysTheEconomist。

Givenallthis,themarketislikelytostruggleoverthenextfewmonths。

CapitalEconomicsseesthebenchmarkSensexindexfinishingtheyearatitscurrentlevel。

Butforallthelikelynear-termturbulence,thelonger-termpictureremainscompelling。

“India’sgrowthpotentialishuge,”saysaStandardCharteredreport。

India’sdemographicprofilebodeswell–ithas1。

2billionpeople,halfofwhomareunder25。

Itsworking-agepopulationwillincreaseby117millionoverthenextdecade,comparedwithfourmillioninChina。

Inthesubsequentdecade,itwillriseby98million,butChina’swillshrinkby51million。

Theeconomyalsolookswellbalanced,whichisgoodforsustainablegrowth,saysStandardChartered。

Privateconsumptioncomprises60%ofGDP。

Withahighsavingsratethereisamplescopeforinvestmenttorisefurther。

Chinais“heavilyskewed”towardsinvestmentandexports。

Furtherpluspointsarea“strongrecordofmacroeconomicmanagement”,alongwithastrongpresenceinglobalservices。

Itisalready“anITsuperpower”,forinstance。

Indiacouldgrowbymorethan9%ayear,outpacingChinauntil2030,whenitwillbetheworld’sthird-largesteconomy,reckonsStandardChartered。

AgoodplayonIndiaisAberdeen’sNewIndiainvestmenttrust。

Itiscurrentlyonadiscountof8。

4%toitsnetassetvalue。

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