Global Investors Choose India over China
Monday, January 29, 2007
In the highly competitive and booming market, even countries are
poised to lure global investors with attractive options. A recent
study by Merrill
Lynch Global Private Client has revealed India
as the first choice for foreign investors. The study even cites
the example of non-institutional and retail investors eyeing India
as a more rewarding market than China, and has called for more investor-friendly
initiatives from the government.
But, what makes India score over China?
For one, India has a very pulsating capital market, not driven entirely
by the government, as in the case of China. While planned activity
from the government has created infrastructure, much of it is underutilized,
and often perceived by experts as exhibitionism by the Communist
regime.
India on the other hand, has hardly invested in infrastructure,
but a hectic pace in this direction is visible now, shared equally
by the public and private sector.
Secondly, in the knowledge industry, India is light years ahead
of China. India has superior higher education facilities. The IT,
pharmaceutical and engineering industries in India score far above
China. Indians are also more market-savvy, with a world class media
and advertising sector. In China, everything is a commodity, and
an imitation of technology the practice. India has a mature services
industry – comprising 50% of India’s GDP.
Thirdly, India’s banking and monetary system is far more sound vis-à-vis
China’s. As against 50% of China’s loans in the bad debts category,
India’s non-performing loans are only 3.5%. India also has an active
corporate and government bond market, with interest rates being
market determined, unlike China.
In India, entrepreneurship is nurtured, having the second highest
number of entrepreneurs per capita after Thailand. Given its population,
it has the highest number of entrepreneurs in the world.
India’s advantage over China also lies in its relatively low dependence
on exports. As against India’s exports forming only 10% of its economy,
China’s depends 40-50% on international trade.
India also has an active stock market, with the BSE over 130 years
old. China’s fledgling share market has still miles to go.
With the economy growing at 8-9%, the Merrill Lynch even recommends
playing on India’s favorable factors with the right strategies to
streamline foreign and NRI
investment.
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