India Is Back On Track

On November 10, India’s government announced a series of aggressive measures to attract foreign direct investment (FDI).

Most importantly, it eased local-sourcing requirements for international retailers looking to expand into India. The government also lifted international capital limits for industries ranging from construction to agriculture.

The aggressive actions show that Prime Minister Narendra Modi is determined to move forward with economic reforms – despite partisan wrangling that’s held up some of his broader efforts to right the economy.

In spite of domestic opposition, though, international investors have taken a liking to Modi and his policies.

His focus on capitalism and emphasis on creating a more open economy than that of his predecessors are seen as strong arguments for investing in India.

Modi Operandi

A brief look at the data shows Modi’s reforms are working. Today, India has one of the fastest growing economies in the world.

As of November, economic growth is projected to remain robust at around 7.25%, according to the Organization for Economic Cooperation and Development. The chart below shows the trends in India’s economic data over a five-year span.

Additionally, public investment has accelerated as key projects are cleared more quickly than before, and private investment is soaring as a result of better infrastructure and greater ease of doing business.

Better benefits and wages for public employees are also expected to support private consumption.

Not surprisingly, the country is drawing renewed interest from international investors, as well, and fund inflows are surging. In the first half of 2015, India saw $19.4 billion worth of FDI, up 30% from the same period last year.

Just this week, Alstom SA (ALO.PA) (ALSMY) and General Electric Co. (GE) both agreed to joint ventures with state-owned Indian railways. They’ll be manufacturing hundreds of freight locomotives.