Edward Hugh

Outlook for the Indian Economy

Hi GPS and Andyn,

I recognise your point about about the political process. I cannot offer myself as a political commentator I'm afraid. All I would draw attention to is the fact that your politicians are hardly worse now than they were five or six years ago, so they are really already "factored in" to the growth process.

Also, of we look at the so called BRICs, for all the scepticism in Brazil and India, and all the undoubted corruption in Rio de Janeiro and New Delhi, I would say both countries are streets ahead of China and Russia looking forward. This is what the Economist calls the "democracy put". The two of them may wobble from time to time, but they are hardly going to either fall apart or have economic melt down, which has to be a risk in either the Chinese (melt-down) or Russian (fall apart through ethnic in-fighting) cases.

But the big point I would stress here is my projection on the underlying growth momentum (which is due to the relative weightings I give institutions and demographics in my growth model). I would seriously suggest that most analysts are seriously underestimating the long term growth rate India can achieve without hitting capacity constraints. I think we will hit double digit growth either late 2009 or early 2010.

Now that oil is dropping back the money is already starting to trickle back into Indian equities.

The following, as reported in Bloomberg yesterday, is also very good news:

<i>Brazil and India were the biggest users of offshore oil rigs in July as Petroleo Brasileiro SA drilled the Americas' biggest discovery in three decades and Reliance Industries Ltd. started developing a coastal field. Brazil deployed 29 rigs, the most in 21 years, and India, the largest user of rigs in the Asia-Pacific, ordered 28, adding two since June, Baker Hughes Inc., the world's third- biggest oilfield-services provider, said on its Web site today. The countries accounted for 18 percent of equipment used to drill in waters internationally, excluding the U.S. and Canada.</i>