India will soon benefit from more passive investment inflows as its government debt will be added to JP Morgan’s Emerging Markets Government Bond Index from June, automatically reallocating more international cash to the country.
Sanghani said the Indian economy has remained strong even as the Chinese economy has slowed, making the country relatively more attractive for international funds.
“Because of these structural headwinds that you see in China and its economy, and because of some of the geopolitical tensions, India is starting to look a little bit more attractive,” he said.
“It’s not as if things in India have remained static. I think there are areas where things seem to be opening up for foreign investors.”
This includes improving liquidity in bond markets to gain a place in the JPMorgan index.
Retirement funds are expected to become particularly important for future economic growth, as governments around the world have major schemes in mind but little fiscal space to fund their plans.
“I think,” Mr. Sanghani said [these funds] It has a big role to play. And we’re seeing around the world now, frankly, that there’s not the fiscal space to do much.
“Particularly on these big issues around the energy transition for example, there is limited fiscal space.”
He pointed to the German government’s green spending plans, which were struck down by the Constitutional Court, while in the UK the government is trying to enlist pension funds to invest more in Britain.
“There is an increasing burden on the public sector probably to try to make sure that they better mobilize their existing pools of capital with domestic pension funds or sovereign funds, but they are also trying to become more open to this foreign investment,” Sanghani added. “.
Losing access to some of these international funds will hurt the Chinese economy at a time when it is already struggling to regain pre-Covid momentum.
The Indian economy is on track to outperform its Chinese counterpart for the third year in a row, and according to IMF forecasts, it will continue to do so in each of the five years in its forecasts.
The market capitalization of the Indian stock market is also benefiting from China’s market capitalization, according to Tim Hayes of Ned Davis Research, as the country outperforms its larger rival and attracts more international funds.
“India’s demographic outlook and long-term growth potential are much better than China’s,” he said.