I have written to you a few times about India and how we have a great story of potential with the now-not-so-new Prime Minister, Narenda Modi. He has now been in office for 10 months and while we may not have seen all his magic yet, it certainly has been a great economic start.
Moody's just upgraded India's outlook from stable to positive. I am glad to see that with multi-million dollars invested in analysts, Moody's now sees what I have been saying for 10 months if not longer.
Talking about the momentum being with India, after the astonishing GDP growth rate of 7.5 percent for the third quarter, India is expected to finish the fiscal year, which ended March 31, at 7.4 percent for the whole year. Jumping on the bandwagon, the World Bank just announced that India could reach GDP growth of 8 percent or higher by 2017.
On the flip side, China just announced its GDP growth rate for the first quarter of 7 percent. While this is down from 7.3 percent from the first quarter of last year, the story gets worse. Economists forecast 6.8 percent growth for the whole year and then 6.5 percent for 2016. This trend is getting worse. While China is working off a large base as compared with India, if this trend continues for a few years, India will soon be knocking on the doorsteps of China.
While all of this good news is picked up by the Western media, the dark side is not being talked about much. Economic growth can be derailed if India is not careful about the Achilles' heel of religious fundamentalism. As many of you will know, Modi is the head of the Bharatiya Janata Party (BJP), which is the political offshoot of the Hindu fundamentalist party, the Rashtriya Swayamsevak Sangh (RSS).
RSS has its roots in a deep-seated belief of Hindu supremacy and is quite clear in its non-tolerance of any other religion. One of its members was actually the one who shot Mahatma Gandhi due to the fact that he had allowed India to be partitioned and given away a part to Muslim Pakistan. In the recent days, this killer's name has been in the limelight as a martyr and poster child of the RSS.
The attacks on Christian churches have increased significantly. Rhetoric against Pakistan has also increased, with more violent skirmishes at the border with Kashmir. Overall, the lawlessness in India seems to be on the rise with thuggish leaders being supported by the BJP in its quest to have complete control over India. Modi himself has been accused of ignoring violence against Muslims in his home state before he became Prime Minister. While charges were dropped, the stigma still remains.
Given the rising unease that the population is fostering, will the economic boom that Modi has been able to foster carry the day? Will the economic boom continue despite the turmoil? Will foreign investments, a must for infrastructure-hungry India, still continue despite the apparent social ills?
In my opinion, India has good potential for growth and this economic story can continue. Modi has to crackdown on growth of Hindu fundamentalism if he wants to continue the success story. This is easier said than done since his mentor, the RSS, is quite powerful and pretty open about its stances. He will have to thread the needle with the finesse of a tightrope walker to ensure that he does not antagonize the powers that made him who he is today while he forges ties with Germany, France and the United States.
If he can balance the two sides, he will win long term.
In the short term, money will pour into India. If you have not yet jumped on that bandwagon, there are exchange-traded funds listed in New York that will help you invest in India without you having to leave your living room.
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