INDIA is expected to outperform all countries in the region. Like China, its economy grew at an annual rate of 7% in the second quarter. By comparison, growth in the eurozone and the US stood at an annual rate of 0.4% and 3.7% respectively in the same quarter. 

In July, the International Monetary Fund (IMF) projected that India would be the world’s fastest growing economy in 2016, with an annual growth rate of 7.5%. The country’s inflation rate, meanwhile, dropped to a record low of 3.78% in July from its peak of 11.16% in November 2013. 

“As the economy has a lower inflation rate, India’s central bank has room to cut interest rates further by at least 50 basis points before year end,” says Goldfeld. 

While many countries in the region have been hit by plunging commodity prices, India — as a net crude oil importer — has benefited from the trend. India’s Ministry of Petroleum and Natural Gas has projected India’s crude oil import bill to fall by 21.7% this fiscal year to US$88 billion (RM378.7 billion) on falling international oil prices (India spent US$112.75 billion on crude oil imports last year). This could give more space for government spending, the ministry says.

Goldfeld observes that India has an interesting demographic scene, with a very young and robust population. During last year’s general election, Prime Minister Narendra Modi pointed out that 10 million to 12 million youth enter the labour market every year. “With people entering the job market every year, this will put pressure on the government for fast growth to create jobs,” says Goldfeld. 

The Indian government, led by Modi, has unveiled its development and economic vision for the next five years. This includes setting up industrial corridors and building 100 smart cities, expressways and bullet trains. A series of reforms has been undertaken to create a more industrial and business-friendly environment. 

Among the reforms is the deregulation of diesel prices from state controls last October, pegging them to international rates, which has saved India US$2 billion so far. The Indian government also proposed a goods and services tax (GST) bill to unify and simplify the complex fees and tax charges in 29 states which will boost economic output by as much as 2%. 

“Some people think that the pace of reform has been a little disappointing, but it is progressing and there is a number of things that have been done. Maybe it is a little slower, but it is not unusual. This will benefit the country in the long term,” says Goldfeld.

Other investors are looking at the determination of the Indian government to reform the economy, which is facing strong resistance from opposition parties. The government is currently planning to push through its infrastructure and industrial policy — it is seeking to amend the land acquisition bill to make it easier for industrial projects to acquire private farmland, which will pave the way for its industrial land-intensive infrastructure projects. 

In April, Rahul Gandhi, one of the opposition leaders, led a large farmer rally that focused rural anger on Modi’s industrial-friendly policies. By alleging that the government’s policy is “anti-farmer”, he said in his speech that “Modiji (Modi) wants to give your land to his industrialist friends”. An impoverished farmer hanged himself in front of hundreds of farmers who had gathered for a protest. 

The contentious land acquisition bill is currently referred to a parliamentary joint committee for examination under political pressure and objection from the farmers. It is expected to be submitted to the upper house of parliament at the end of the year for a decision. 

The government’s push for this policy has been temporarily blocked by the opposition in the upper house, which have the majority seats. It is reported that the Modi administration is planning to shift the action to the states by allowing each state to draft its own land acquisition laws.

Meanwhile, the GST bill, which is looking to unify the country’s tax system, has experienced the same fate as the land acquisition bill. The opposition parties have once again successfully blocked the bill in the upper house of parliament. The Indian government, however, has said that the next parliamentary session could be advanced to pass the bill to roll out the new tax system in April next year.

This article first appeared in Money + Wealth, digitaledge Weekly, on September 21 - 27, 2015. Click here to subscribe from RM30 for the digitaledge Weekly and digitaledge Daily.