With a young population of 1.4 billion people and a government that presents itselfas assertive and reformist, India has increasingly managed to excite investors over thepast years. The positive sentiment is further helpedby the fact that many investors now consider Chinamore or less uninvestable while manufacturing companies are looking for new places to move theirproduction. These factors have led to record inflows into India-focused ETFs in 2023 and the firstquarters of 2024 ahead of the country’s election.Markets initially reacted shocked to the ruling BJP’ssurprisingly weak result, possibly indicating general dislike for uncertainty more than great faithinto the country’s prime minister. With no claimto completeness, we are playing advocatus diaboliand taking a critical look at its track record and theprospects for the world’s most populous country.

• Sluggish economic development and policy missteps in China alongside decent short-term GDP momentumin India have turned the latter into a hotspot destination for emerging market investors.
• Notable announcements such as Apple moving part of its iPhone production to Tamil Nadu have fuelled hopesthat the home of 1.4 billion people will become the world’s next growth engine and supply chain backbone.
• Improving sentiment and ETF inflows have also backed an impressive stock market rally, with the Nifty 50even tracking the US over the last three years.
• However, looking at the economic track record of the Modi government over the last 10 years and thestructure and fundamental medium-term performance of the Indian equity market, we see plenty of scopefor disillusionment.