Now that Narendra Modi is running the show in India, chief financial officers from around the world say they’re seeing more growth prospects there than in China. That means corporate investors are more optimistic about India’s immediate future than they are in China.
According to a survey by American Express and CFO Research, released last month, 86% of respondents are predicting economic expansion in India, up from 78% in 2013. What’s more, while India has been set back by structural reforms and gridlock, 70% of CFOs are confident that political changes over the next year will positively affect their company’s ability to grow.
The numbers should come as no surprise.
Everyone believes that years of gridlock in India’s parliament ended when Modi became the country’s prime minister. India’s GDP has been growing below potential, often falling in the low 5% range. The country is now poised for a rebound, providing Modi’s can create the pro-growth policies corporations expect of him.
“He delivered in his home state of Gujarat and we think he will do the same nationwide,” says Joel Wells, a fund manager at Alpine Woods Capital in New York.
Modi’s BJP party won in a landslide in May, giving him a mandate to deliver on his promises to get India’s economy developing again. India is the poorest of the big four emerging markets, prompting most emerging market investors to see greater potential in India than in the rest of the BRICs.
A young boy looks into a camera in Mumbai. India is the poorest of the BRICs. This low base gives investors hope that India has a lot more room to grow than China. (Photo by Eric Kim)
China on the other hand is in a different predicament. In some parts of the country, over-development is the problem, not under-development. China is also restructuring its economy away from an export driven one dependent on low labor costs, to a consumer market with a growing middle class. And that middle class requires higher incomes. As China moves out of its Happy Meal making economic past, China’s growth is slowing.
China’s economy has rebounded somewhat, particularly in the first quarter of 2014, but CFOs in China are feeling much less confident in the economy. According to the survey, only 75% are predicting economic expansion in 2014, down from 94% in 2013, the lowest the country has seen in two years.
Some takeaways from the report:
For CFOs, India Better Than China? - Forbes
According to a survey by American Express and CFO Research, released last month, 86% of respondents are predicting economic expansion in India, up from 78% in 2013. What’s more, while India has been set back by structural reforms and gridlock, 70% of CFOs are confident that political changes over the next year will positively affect their company’s ability to grow.
The numbers should come as no surprise.
Everyone believes that years of gridlock in India’s parliament ended when Modi became the country’s prime minister. India’s GDP has been growing below potential, often falling in the low 5% range. The country is now poised for a rebound, providing Modi’s can create the pro-growth policies corporations expect of him.
“He delivered in his home state of Gujarat and we think he will do the same nationwide,” says Joel Wells, a fund manager at Alpine Woods Capital in New York.
Modi’s BJP party won in a landslide in May, giving him a mandate to deliver on his promises to get India’s economy developing again. India is the poorest of the big four emerging markets, prompting most emerging market investors to see greater potential in India than in the rest of the BRICs.
A young boy looks into a camera in Mumbai. India is the poorest of the BRICs. This low base gives investors hope that India has a lot more room to grow than China. (Photo by Eric Kim)
China on the other hand is in a different predicament. In some parts of the country, over-development is the problem, not under-development. China is also restructuring its economy away from an export driven one dependent on low labor costs, to a consumer market with a growing middle class. And that middle class requires higher incomes. As China moves out of its Happy Meal making economic past, China’s growth is slowing.
China’s economy has rebounded somewhat, particularly in the first quarter of 2014, but CFOs in China are feeling much less confident in the economy. According to the survey, only 75% are predicting economic expansion in 2014, down from 94% in 2013, the lowest the country has seen in two years.
Some takeaways from the report:
- Expectation for substantial economic expansion in home country: India 33%, China 10%
- External factors that will positively affect company’s growth:
- Economies in other countries: India 73%, China 68%
- Political changes in other countries: India 43%, China 32%
- Changes in regulatory/accounting requirements: India 76%, China 48%
- Availability of capital: India 87%, China 70%
- M&A: India 90%, China 67%
- Financial restructuring: India 83%, China 68%
- Investment in labor and headcount: India – Increased from 47% in 2013 to 57% in 2014, China – remained at 58% in 2013 and 2014
For CFOs, India Better Than China? - Forbes
