Even more than the heat, the first thing most visitors notice when they arrive in India is the huge number of people. If you thought Heathrow was busy when you left, the crowds at Bombay Sahar are another story.
Given airline schedules and time zone changes, you might leave London before lunch but it is almost midnight, local time, when you land. Even then the terminal is bustling with people, prompting you to recall the line in the guide book that Bombay's population density, at 43,000 per square mile, is one of the highest in the world. And that population is one of the key factors in making India increasingly attractive to investors. It provides both a growing market and an enormous resource for the country's accelerating industrial development.
While much of the Indian economy conforms to the typical pattern of developing countries - "emerging markets" in investment speak - there are some surprises.
Information technology, for example, is a big employer. In terms of staff numbers, the world's second-largest software industry is found in and around Bombay and, above all, Bangalore, sometimes dubbed India's science city. Go into the bars on Bangalore's Church Street and Gandhi Road and you'll find the talk is all about the computer industry - who's up, who's out, which contracts are going well. You'll also notice it's men doing all the talking. Even though more and more Indian women are joining the software workforce, they don't generally go out drinking.
Much of the work is in offshore development for multinational companies, which have been attracted by low labour costs. Salaries of pounds 500 a month are generous by Indian standards, but less than a quarter of the going rate for similar skills in the UK. That's one reason why IBM, HP and Sun have development programmes in India, sometimes in partnership with local firms like Tata and Wipro.
Troubleshooting is another big growth area, thanks to the time differences between India, Europe and the US, as Ashwali Mathur at investment manager Guinness Flight explains: "A customer support agent in California can take details of a problem in the afternoon or early evening, and send it to India by electronic mail. As the US customer heads for bed, the Indian software engineers are just arriving for work and they have all day to work on the problem. By the time the customer gets to work next day, the solution is found and the 'fix' is waiting for him."
Mr Mathur says India should not be viewed as a place for a quick buck. "It's a market for the long-term investor, and by that I mean anywhere from three to 20 years."
One of the problems of investing in emerging markets is that if the local currency slides in value, so will the investment returns in sterling terms. And that's another reason why the software industry is attractive: because most of its earnings are dollar-denominated, the rupee risk is minimised.
The same is true of the big hotel chains, whose earnings are linked to the value of hard currencies and can therefore benefit from any weakness in the rupee. The two "blue chips" in the hotel industry are East India Hotels, which owns the Oberoi chain, and Indian Hotels, whose flagship property is Bombay's luxury Taj Mahal hotel. Properties such as these are regarded as core holdings for Indian fund managers: good long-term growth prospects with a hedge against weakness in the rupee.
Guinness Flight is one of several UK investment firms to have launched India funds in recent years, and investment in the stock market by international fund managers, at more than pounds 1bn so far this year, is well ahead of last year's levels. The most recent addition is Abtrust's Indian Fund, which aims to attract big investors with pounds 70,000 to put in. Like many others the fund is technically based in Mauritius and Dublin, a structure which minimises overheads and tax liabilities.
For those of us with more modest portfolios, GT's Indian Small Companies Fund has a minimum investment of only pounds 1,000. Andrew Hutchings at GT says he is bullish about the stock market, despite some disappointment that the Budget in India last month was not more wholehearted in its commitment to economic reform.
The Budget - the first from the coalition government which came to power earlier this year - was widely seen as a compromise between the free marketeers and those preferring a more cautious approach. However, as Mr Mathur points out, there is broad agreement on the direction of the economy, if not the pace of change. "For years the government was dominated by the Congress Party. Then we saw the challenge of the BJP. Now we have the emergence of the United Front, which is looking for consensus," he says. "But the general direction of economic management is constant. We see a continued commitment to GDP growth, increased privatisation and increased foreign investment.
"While many emerging markets operate in a very volatile political environment, remember India is the world's largest democracy. In one sense that means there are too many decision-makers, so there are limits on the speed at which changes can take place. But for an investor, provided you take a long-term view, there's no serious political risk."
Growth and stability in India
WITH a population of 920 million and an electorate of 500 million, India is the world's largest democracy. One reason for its slow economic development is that, until recently, foreign investment was shunned. Famously in the 1970s, Moraj Desai, the prime minister of the day, confronted the local IBM chief. "Is IBM smarter or is India smarter?" he asked, demanding that the company share its technology with local firms. IBM declined and pulled out, returning only when the political climate changed early in the 1990s.
GDP growth has been accelerating, from 4 per cent last year to a forecast 5 per cent this year, but GDP per head, at $328, is still low compared to other emerging markets. Inflation has fallen from more than 13 per cent in 1992 to less than 5 per cent and the government is committed to maintaining price stability.
Bombay hosts the largest of India's 23 stock markets, with 8,000 quoted companies and 15 million direct investors. But the value of these shares is still relatively low at $130bn, up from $2bn in 1980.
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