Amid the economic gloom, India’s rise couldn’t come at a better time

The new year has got off to such a depressing start with markets shaking at the prospects of China’s slowdown, that I want to talk about some good news – India.

I spent most of December in Kerala, southern India, one of the most literate states and an important juncture of the Maritime Silk Road.

Visitors to Borobodur in Java and Angkor Wat in Cambodia would know how Hinduism and Buddhism influenced their history and culture through maritime trade. But Tamil influence in Southeast Asia was reinforced by the Cholan invasion of Southeast Asia in the 11th century under the Southern Indian Cholan conqueror Rajendra I, who at his peak conquered Sri Lanka and Srivijaya, the great Southeast Asian power based in Palembang, Sumatra.

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But more recent Indian influence came when the British imported large numbers of South Indian Tamil workers to provide labour in their railways and rubber estates in Malaya. In the meantime, Indian traders, goldsmiths and moneylenders were active in all the free ports established by the British throughout Asia and Africa, including Hong Kong. Until the rise of Silicon Valley and London, Hong Kong hosted one of the richest Indian diaspora communities.

India’s growth story is impeccable in terms of timing. It has already overtaken China as the fastest-growing economy with 7.3 per cent growth in 2015 and an expected 7.5 per cent in 2016. India is a major beneficiary of low oil and commodity import prices, and because exports comprise only 16.5 per cent of GDP, it is also less vulnerable to external demand slowdown.

In a world looking for new growth markets, India is looking better and better as a destination for foreign investment, mainly because of its large domestic market, cheap labour and reasonable macroeconomic policy framework.

Unlike in China and the Association of Southeast Asian Nations, the constraints to growth in India lie in its lack of high-quality infrastructure and the famous “licence raj”, the complex bureaucratic regulations and legal issues that make it difficult for businesses to navigate.

On the plus side, the Indian growth story is founded on two major factors – the first is that it is benefiting from good demographics, since the median age is only 25, considerably less than that for China (37) and Japan (45). The second is a British colonial legacy – the English language, common law and British governance skills. The West sees India as the only population giant in the 21st century that can be an ally and counterweight to China.