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Wednesday, June 13, 2012

India - the Next Economic Powerhouse

Copyright (c) 2008 Paul Hata

With a GDP growth rate of 9.4% in 2006-07, India's economy is among the fastest growing in the world.India's GDP is over US$1 trillion with a per capita income of US$977 while its per capita (Purchasing Power Parity) is US$2700.

With the new open door policy, investment in India has become a popular choice, giving China a fair fight for the share of global investments. India, however, is less aggressive and a more conservative country compared to many other developing countries in Asia particularly China.

Before 1991, India's government had in place red tapes and taxes that discouraged outside interference in their economy and growth. Fearing for the local industries, the Indian government protected its weak economy by putting in place a big tax percentage on imported materials and discouraging attempts by foreign investors when they showed an interest in dabbling in promising companies in India. If they were to grow, India wanted it to be from their own effort and not from the fact that anyone helped them to achieve the success. Therefore, investment in India was difficult before 1991.

But the country is completely different today because it plays a big role in general meetings all around the world that dealt with world economy via the World Trade Organization. India is an active and founding member of the General Agreement on Tariffs and Trade (GATT). Needless to say, as India's economy starts to relax its laws on foreign investment, many interested parties who see the light at the end of the tunnel began funneling in their funds.
With China, we know that manpower is the main pulling point. The same goes for India. India is one of the countries in the world that provided a cost-effective labor force and an abundance or raw material, mostly textile related. India's textile industry is a whopping $36 billion dollar industry, a huge lion share for a developing country. Investment in India's textile industry is a sound investment deal as it contributes up to be about 5% of its GDP!

India's labor-intensive market is highly-trained and attracts many foreign investments. Granted, many low-income groups of Indians are home-trained in it, as an India investor, it is best to take note of this fact. Every country has its own expertise and skills. India is a country with a healthy number of people capable of ruling the textile industry in Asia...the only other Asian country running alongside it in the textile industry and fighting for the same slice of the market is China.

While both countries fight for the lion share of the industry, the fierce competition between China and India will only benefit foreign investors in India's textile industry.

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