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India has been one of the best performers in the world economy in recent years. Growth had been supported by markets reforms, huge inflows of FDI, rising foreign exchange reserves, both an IT and real estate boom, and a flourishing capital market.
Like most of the world, however, India is facing testing economic times in 2008. India has to compete ever harder in the energy market place in particular. The Indian Government has signed a
wide-ranging nuclear treaty with the US, in part to gain access to nuclear power plant technology that can reduce its oil thirst..As part of the fight against inflation a tighter monetary policy is expected, but this will help slow the growth of the Indian economy still further, as domestic demand will be dampened. External demand is also slowing, further adding to the downside risks.
The Indian stock market has fallen more than 40% in six months from its January 2008 high. $6b of foreign funds have flowed out of the country in that period.
The picture is not all gloomy - A growing number of investors feel that the market may now be undervalued and are seeing this as a buying opportunity. If their optimism about the long term health of the Indian economy is correct, then this will be a needed correction rather than a downtrend
Further hope comes from the confidence of India´s home bred companies. As well as taking over the domestic reins, where they now account for most of the economic activity, they are also increasingly expanding abroad. India has contributed more new members to the Forbes Global 2000 than any other country in the last four years.
