Speaking at a roundtable event in London, Vanessa Donegan said she expects India to exceed China between 2016 and 2017 on condition certain reforms take effect.
“China is experiencing a structural slowdown”, she said. “Public sector investment has been decreasing and Chinese debt has largely extended to the private sector.
“In comparison, India has been growing very slowly and is now in a much better position than China in terms of private sector investment.
“Very lucky”
“India has been very lucky with the timing of the fall in oil price, while the country’s economy has remained pretty stable because the twin deficits which have dogged India are looking much better.”
However, Donegan said growth in India is largely dependent on the outcome of two parliamentary bills: the goods and service tax (GST) and changes to the land acquisition bill.
She also said India’s share of manufacturing in GDP has “scope to rise”, pointing to the “Make in India” campaign, which prime minister Narendra Modi launched last year in the hope it will encourage the domestic manufacturing sector to grow from 18% of GDP to 25% by 2020 and create 100 million new jobs.
But manufacturing was not the only sector she expects to do well, adding that banks, industrials, pharmaceutical and IT firms were her top sectors in India. “Banks benefit from a stronger economy, while IT and pharma firms will increase share in export markets, and industrials gain from a boost in investment demand,” she said.
“I think the reforms are hugely dependent on Modi as an individual,” said Donegan, adding that it is important to monitor the reform process which could “drag on economic growth”.
“Niche business opportunities”
Despite forecasting accelerated growth in India, Donegan still maintains an overweight position to China, suggesting the country is offering some “niche business opportunities”, as well as an increasing number of opportunities in the healthcare and insurance sectors.
“Slower growth in China doesn’t mean you can’t make money from it,” she said. “It’s just different to the way it was before. China just can’t have the economic growth that it’s had in the past.”
Following today’s announcement that the Chinese growth rate was at its lowest level in a quarter of a century, Premier Li Keqiang has set the new growth target at 7%, down from the previous 7.5%.
Meanwhile the Reserve Bank of India cut its key interest rate yesterday by 25 basis points to 7.5% in a bid to boost economic growth.
