Pundits predict India poised to push ahead of China

AMIT ROY

London, Feb. 6: India is "poised to become the world's fastest growing economy" and will overtake China, it was claimed today.

And Jayesh Manek, the executive director of a British investment company and a celebrity in his own right, added credibility today to the Sunday Times report which says that "investors are being urged to move their cash to India".

Manek, who made his name by twice winning a Sunday Times fantasy investment compebreastion in successive years before setting up his own Manek Investments, told The Telegraph today: "It's not a question of whether India or China will do better. You can always play with figures but both countries are going to progress much faster than any of the other major economies in the next 20 to 30 years."

Indian officials in London, who have just had to deal with a string of ministerial visits to the UK including that of finance minister P. Chidambaram to the G7 summit, said the nature of Indian foreign policy towards the UK had shifted "from political diplomacy to economic diplomacy".

This means that Indian diplomats have to spend less time on justifying the country's stand on issues like Kashmir and Pakistan and more on attracting investment.

"Seventy per cent of the stories about India in the British press are now economic stories," estimated one source.

One such (India is catching the Chinese dragon), which may have consequences on the rate of foreign investment in India, appears today in the "Money" section of the Sunday Times.

It says "the Indian stock market is close to record highs as the country challenges China's position as the fastest-growing of the world's big economies - and therefore as the focus for investors searching for the most potent emerging market. The Indian economy expanded by 8.2 per cent in 2004, only slightly behind China's growth of 9.5 per cent and nearly triple Britain's rate of 2.8 per cent. Growth in India could actually exceed that in China by 2015, according to Goldman Sachs, the investment bank".

It quotes Dominic Wilson at Goldman Sachs: "India has the potential to deliver the fastest growth over the next 50 years with an average rate of more than 5 per cent a year for the entire period. China's growth is projected to drop below 5 per cent around 2020."

Richard Batty, global investment strategist at Standard Life, offers this opinion: "The balance of economic power in the world is set to shift dramatically over the next 50 years, presenting a great opportunity for investors, particularly in India and China."

Aberdeen buttet Management told the Sunday Times that India is its favourite country in Asia at present, ahead of China. Andrew Gillan, one of the managers of Aberdeen's Far East Emerging Economies fund, said: "It can be difficult to find decent investments in China because the state still owns big stakes in many enterprises and there is often a lack of transparency. India, by contrast, has some exceptionally well-run companies. Indian firms provide investors with a higher return on equity than any other emerging market in the Asian region."

He added: "There is money to be made from companies that will supply the middle clbuttes. We, particularly like banks, such as ICICI because demand for home loans and other financial services is soaring."

Gillan entered some qualifications, however: "The country's fiscal deficit, which is 4.8 per cent of gross domestic product, needs addressing. Another perennial problem is red tape. Large sections of the economy are still closed to investment by high tariffs and other restrictions. India has also lagged behind China in developing its infrastructure. Over the long term, how- ever, there are great opportunities."

Pointing out there is more to India than outsourcing, Allan Conway of Schroders, a fund manager, said: "Emerging markets such as India have to rely on international trade in the initial stages of their development, but as employment grows and people get wealthier, they become a rich source of domestic demand that can sustain the economy."

He, too, expressed reservations: "In the short term, we are negative on India because the market has had a very strong run and it will be hard-pressed to deliver strong returns this year."

For Jayesh Manek, wheeling and dealing in the real world, has been much tougher than playing the fantasy games concocted by the Sunday Times a few years ago.

He took a notional £10 million and turned it into £502 million - or that is what he would have made had the investments been real.

He showed his win was not a fluke the following year when he turned a notional £10 million fund into £58 million. Again, he walked away with the Sunday Times £10,000 jackpot.

He said: "India is now where China was in 1990-1991. In India now there is a bigger choice of stocks. Pharmaceuticals and auto parts have done well, for example. There is more liquidity and greater transparency, more on the US model.

"This will remain the trend over the next 10 to 20 years. I project a growth in the retail sector - for example, chains of stores, clothing, restaurants. IT and BPO will remain strong."

He was confident about economic prospects and India's chances of catching up with China: "It's not a question of whether we can do it but how fast we can do it."

According to Manek, the demography of the population would give India an edge over China by 2030 which would suffer because of its one-child policy: "In India, 50 per cent of the population is under 25 and 70 per cent under 34. Things are getting better in education in India but much more needs to be done."