WITH liberalisation and regulatory reforms already implemented, many people are investing in India as an emerging market because the basic mechanisms for sustained growth are now in place.
Following a period of political unrest, which included the assassination of the chief minister of the Punjab and the ousting of the chief minister of Andrah Pradesh, Prime Minister Minister Narasimha Rao has survived threats to his leadership and is ready to move forward.
A report for the JF India Trust written by Cynthia Liu, director of investment services for Jardine Fleming Unit Trusts, says a major depreciation in the rupee is unlikely because it will not be a politically popular move. The foreign reserve, with US$20 billion (HK$154 billion), is in a healthy state and that net-trade accounts for less than 10 per cent of GDP.
The report says that BJP-Shiv Sena's plan to scrap the Enron power project has caused fear that foreign dollar investment might slow down. This has been further heightened with the latest bidding frenzy for telecom licences, leaving the future of the private sector entry into infrastructure projects uncertain.
Despite this fear, Ms Liu's reports says economic growth should continue to improve. Rising interests have not damaged final demand growth in the economy so far. From the April to June quarter, sales growth at cement, steel and auto manufacturers seems to [be] running at the same rate as in the September to March period.
However, industrialists have warned of slower growth in the second half of the year.
The report states that inflation has stabilised at the eight per cent level and monetary policy is expected to ease with the forthcoming credit policy review.