This past year has been one of gloom for India – except, apparently, when it comes to the stock markets. As Table 1 lays out, the Sensex has massively outperformed pretty much all major indices. China’s major stock market index actually lost value this year; the Sensex gained a quarter of its value at the beginning of this year. It is the conventional wisdom that much of this is because of high foreign institutional investments into the Indian market. If so, why?
Table 2 provides part of the answer. In spite of the catastrophic slowdown in growth, India is easily outperforming most of its emerging-market peers – save, of course, China and the recent breakout nation, Indonesia. Even the freeze in industrial output, visible in Table 3, does not put it on the top of the list – Brazil’s industrial output has declined by 3.5 per cent year-on-year. But then there’s the high inflation, some might say. True; but, as Table 4 shows, over 2012 so far India’s wholesale price inflation doesn’t look like too much of an outlier. Russia’s is higher; Brazil’s is close.
Meanwhile, the macroeconomic numbers, scary as they are, probably aren’t affecting international investors that much, because they’ll be looking at comparative statistics. Table 5 shows India’s debt-GDP ratio is well below the US and UK, and even Brazil. The only way India stands out among emerging markets is its fiscal deficit as a percentage of GDP. That’s thus a major concern – but, again, as Table 6 demonstrates, it’s in the same ballpark as the US and the UK. And Table 7 shows the current account deficit is not as bad as South Africa’s.(Click for tables)
Even the rupee, in Table 8, has not swung against the dollar as much as have, say, the Indonesian or South African currencies, or even Russia’s.