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India continues to attract global attention as a compelling investment destination. Time to look at the key reasons why India should be on the radar for long-term investors.
Reason 1: Strong economic growth
For starters, India is showing consistent economic growth and is on course to become the third-largest economy by 2031, according to S&P Global. Data from India’s Ministry of Statistics and Programme Implementation shows that real GDP growth averaged 8.3% in the past three fiscal years (2021 to 2023).
“Many positive factors such as strong demographics, competitive labour costs, relatively low levels of debt compared to other countries, and an increasingly favourable environment for doing business are important long-term drivers for India’s growth,” said Avinash Vazirani, Investment Manager, Indian Equities at Jupiter.
However, S&P highlights the importance of continued reforms, infrastructure development, and sustainable technologies to continue growing strongly.
Reason 2: Favourable demographics
India’s young population is a robust economic engine. Over 50% of the population is under the age of 25, providing a workforce advantage that is crucial for long-term productivity. This demographic trend is complemented by rising urbanisation and productivity gains, contributing to the rise of India’s middle classes. “We expect these rapid demographic shifts and improvement in household wealth will continue to drive India’s domestic economy for the remainder of the 21st century,” Vazirani said.
Reason 3: Political stability and positive policy direction
Prime Minister Narendra Modi’s government has implemented several reforms in recent years aimed at facilitating business and encouraging foreign investment. Measures such as the Goods and Services Tax (GST) and the Production Linked Incentive (PLI) programme promote a business-friendly environment. These reforms also support longer-term goals such as boosting manufacturing and infrastructure development, which are among the key pillars of India’s growth story.
“Going forward, given political continuity following recent elections, the overall direction of economic policies should remain pro-business and investor-friendly,” opined James Thom, Senior Investment Director, Asian Equities, at abrdn.
In June, Modi was re-elected as India’s prime minister for a third term.
Reason 4: Global supply chain diversification
India is emerging as a key player in global supply chains due to geopolitical shifts and efforts by multinational corporations to diversify away from China. Rising tensions in U.S.-China relations, coupled with trade disruptions, have driven companies to seek alternative manufacturing hubs. India’s vast labour force, improving infrastructure, and government incentives make it a natural beneficiary of this transition.
Reason 5: Sustainable development and renewable energy
India is a leader in renewable energy development, particularly in solar and wind power. The country’s commitment to reducing carbon emissions is aligned with global sustainability goals.
“Globally, it already ranks as having the 4th largest wind capacity and the 5th largest solar capacity. However, there is an ambitious target of adding 500 GW of installed renewable capacity by 2030, while cutting carbon intensity by 45% over the same time – to achieve this will require huge outlays and create sizeable investment opportunities too,” said Thom.
All these factors make India a “must-have in any investment portfolio”, abrdn’s Thom opined.
