India reforms, elections would likely dictate NRI investment sentiment
Investment in infrastructure development, anticipated record remittances to accelerate GDP and put economy on road to success
Non-resident Indians in the UAE have been closely monitoring developments back home as 2019 is poised to be a year when elections in April-May will decide the course of further economic reforms that will pave the way for 8 per cent GDP growth in years to come, industry stalwarts say.
Corporates and industry leaders expect that economic reforms, investment in infrastructure development and an anticipated record remittances will accelerate India's GDP and put the economy on the road to success. They have also prioritised investment options for NRIs that include real estate, bank deposits, mutual funds, insurance, gold, stocks and other alternative investments.
"2019 is likely to be an action-packed year with the upcoming general elections. Many reforms such as GST will gain momentum. Overall investment in infrastructure will continue as it has happened in the last few years," said A. Balasubramanian, chief executive officer at Aditya Birla Sun Life AMC.
Balasubramanian said India may see higher growth post-election due to accelerated execution in every area that drives growth.
"We will probably see a high focus on rural sectors especially in uplifting the rural economy and improving job growth in India," he added.
India's GDP is forecast to expand 7.5 per cent in fiscal year 2020 and 7.7 per cent in 2021, according to the International Monetary Fund (IMF).
"India's economy is poised to pick up in 2019, benefiting from lower oil prices and a slower pace of monetary tightening than previously expected, as inflation pressures ease," the IMF said in World Economic Outlook report launched recently.
The World Bank's latest Migration and Development report puts India as the largest recipient of remittances in 2018. Inward remittances to India were estimated at $79.5 billion - ahead of China's $67.4 billion - accounting for over three-fifths of officially recorded remittance flows to South Asia, around 15 per cent of flows to low- and middle-income countries and 11.5 per cent of global flows.
Nimish Makvana, senior partner at Crowe Mak, said India retained the top position as a recipient of remittances last year as NRIs sent $69 billion back home.
"Remittances to India picked up sharply by 9.9 per cent, reversing the previous year's dip, but were still short of $70.4 billion received in 2014," he said.
India's remittances grew at 15.2 per cent in 2018, surpassing the average growth rate of 13.5 per cent in South Asia. At this rate, in the absence of any significant global shocks, India is likely to receive over $100 billion in remittances by 2020. The major investments by NRIs goes towards real estate, stock market and service and industrial projects.
NRIs investment options
Balasubramanian advises that NRIs can invest across mutual fund products without any restriction on amount and types of scheme. Most NRIs first remit the money into their savings and current account in their home country. However, this money can be transferred to mutual fund liquid schemes as they have historically offered better risk-adjusted returns than savings and current accounts.
Furthermore, investments by NRIs are usually in fixed deposits of banks. However, debt mutual fund schemes can be considered as they can generate better returns, adjusted for tax. Both liquid and debt scheme options take care of income generation of investors with relatively lower risk compared to equity schemes, opines Balasubramanian.
"In order to create long-term wealth, one must look at equity schemes. Given the nature of the NRI remittance, NRIs should choose to invest in equity schemes in the form of a Systematic Investment Plan or lump sum of any amount. Investment in equity category can be considered in multi-, mid- and small-cap funds as they deliver better than index return in the long run," he added.
The most preferred investment options, in order of priority, include the following: real estate, bank deposits, mutual funds, insurance, gold, stocks and other alternative investments. Most NRIs are long-term investors and their investment goals and objectives are directed towards creating corpus children education, retirement planning and others, and to have a decent dwelling for their post-NRI status living.
Krishnan Ramachandran, CEO of Barjeel Geojit Financial Services, said India is now poised on a growth trajectory where its GDP growth is likely to go beyond eight per cent in the coming years.
"This trend in the coming four to five years will lead to an unassailable position where global investors will start increasing their investments to India, both on the foreign direct investment and foreign portfolio investment routes. However certain global cues have to be factored in, such as the outcome of the trade wars between US-China, Brexit, outcome of the Indian elections and others."
Echoing the similar positive sentiment, Ram Buxani, chairman of ITL Cosmos, said India has already established its identity as potential investment destination and many countries are showing keen interest to divert their funds.
"So 2019 is going to be good year for overseas investments," Buxani said.
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