Is India the Next Big Growth Story Singapore’s Investors Should Take Note Of?

Investors interested in the growth of India should pay attention to its Budget 2015 delivered last Saturday.

In his first ever Budget presentation after his election win, India’s Prime Minister Narendra Modi listed out many reforms and proposals which he thinks will help propel the country forward.

One of the key takeaways of the Budget would be Modi’s emphasis on his Make In India project, which aims to stimulate India’s manufacturing sector and in turn create more jobs. To help in that endeavor, the Indian government had announced some measures:

  • Customs duty will be reduced on a total of 22 items so that cheaper inputs and raw materials can lead to lower import costs.
  • Tax on royalty and fees for technical services are reduced to 10% to attract cheaper technology transfer from abroad.
  • Small businesses will have greater access to credit and tax reliefs.
  • Not forgetting the workforce, the government will kick-start an initiative called National Skills Mission in order to promote skills-upgrading and increase employability of rural workers.

With that, let’s take a look at how India’s potential growth story will have an impact on Singapore.

According to a Channel New Asia report, “Singapore is currently India’s largest source of foreign direct investment, amounting to S$7.7 billion in Fiscal Year 2013/2014.” The same report also quoted Mr N K Singh, a senior member of Modi’s political party, the Bharatiya Janata Party:

I think that this government and the prime minister has taken it upon himself the challenging responsibility of how to improve India’s rating on the ease of doing business, in terms of the speed at which permits are given, speed with which contracts are enforced, and taxation policies being aligned with global taxation policies.”

With the commitment of India’s government to drive economic growth through the rollout of new pro-business initiatives, Singapore companies may have started to see untapped potential in the country too.

In fact, both Singapore and India will probably be working even more closely going forward as they look towards the signing of a Strategic Partnership this year. This comes after trade between Singapore and India had jumped by three times in the past 10 years since the signing of the Comprehensive Economic Cooperation Agreement in 2005.

Investors who believe in and wish to participate in India’s growth story can do so by investing in Singapore-listed exchange-traded funds which track some of India’s equity market indexes. Examples of such ETFs include the iShares MSCI India ETF (SGX: I98) and Lyxor ETF MSCI India (SGX: G1N). The benchmarks for the duo are the MSCI India Index and the MSCI India Net Total Return Index.

Besides ETFs, shares like the business trust Ascendas India Trust (SGX: CY6U) – which has the majority of its operations based in India – can act as proxy-plays too.

Suffice to say that investors in Singapore do have a fair number of choices when it comes to participating in India’s growth story. But, while selecting amongst the choices can be important, it’s even more important for investors perform their due diligence on India’s growth story and see if brighter days are truly ahead for one of Asia’s most populous nations.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor James Yeo doesn’t own shares in any companies mentioned.