India in the spotlight
By International Adviser, 11 Nov 15
Samir Mehta, manager of JO Hambro’s Asia ex-Japan Fund, gives his observations from a recent research trip to India, a market which is a large overweight in his portfolio.
While India’s rural economy has largely slowed, the urban markets are so far in a relatively better state. Yet, across industries, volume growth is very anaemic.
Companies are reporting much higher margins as a result of falling commodity prices and a reduction in competitive pressures, but, in general, growth is scarce.
Incrementally challenging
The well-managed businesses are still delivering decent top line and profit growth. But, even for these companies, it is going to be incrementally challenging.
Many expected that falling commodity prices, especially oil, would mean a bonanza for Indian consumers.
In reality, they have not enjoyed any benefits, because the Government increased indirect taxes on petroleum, although governmental finances are in much better shape as a result.
As income growth has moderated and credit growth (except for micro finance institutions) is muted, expectations remain high for large government outlays on road construction, railways and defence, in particular.
By the end of the year, public sector employees will get a hefty revision in salaries as part of their five-year wage negotiations.
It looks like government largesse is the main hope for revival in economic activity. But progress currently is slow.
