The new China is called India

We've been talking about it for days due to the elections (which started on April 19th and are still ongoing) and the record heat (52.3 degrees yesterday). But it will remain a protagonist for a long time because it is destined to become the second world economy by 2075 according to Goldman Sachs, with a purchasing power that will exceed that of the USA by 30%. It is increasingly the alternative to the Dragon for foreign investors. Over the last year, 2.6 billion dollars have flowed from funds exposed to Beijing, while 6.7 have entered those specialized in Mumbai. Investors move where they see growth, so they are a fundamental signal for understanding the path of a country.

What drives India is first and foremost the demographic situation. It has recently overtaken China to take the lead with 1.4 billion inhabitants. And the average age is 28.4 years compared to 38.4 years for the Chinese. So Mumbai has a guaranteed demographic dividend (obtained when the working-age population exceeds the non-self-sufficient population). Working-age Indian citizens will increase by more than 100 million by 2030, while Chinese citizens will decline by 40 million. This means more workforce, more productivity and innovation and more consumption, driving economic growth.

Then there is the undeniable rapidity of the economic growth of the former English colony. At the moment, India's GDP is still lower than China's, but it is progressing at +7/8% and the five-year forecast is +12.9%. At the same time, the Chinese slowdown is underway, after decades of boom.

The Indian surge was certainly driven by investment in physical, digital and also financial infrastructure (as Beijing did in the real estate sector, which then exploded). To relaunch the internal economy, the accelerator was pressed on fixed investments, which in 2023 reached 35% of GDP.

Since 2014, year after year, India has surpassed Russia, Brazil, Canada, Italy, France and the UK in terms of GDP and already has Japan and Germany in its sights. And it did so by diversifying across all economic sectors, particularly manufacturing, but with a strong focus on strategic areas such as mobile telephony, semiconductors and electric vehicles. Without forgetting the green development, with strategic plans, of a country that is still 70% dependent on coal. And a coal magnate himself has subsidized what will be the largest green power plant in the world and which in five years will provide energy to 16 million Indian homes thanks to solar and wind plants.

Then there is the geopolitical factor. The United States in its anti-Beijing policy is pushing India, encouraging an increase in foreign direct investment. In diversifying their production bases, large Western companies land in India to exploit the market and the rich middle class and the cheap, qualified labor. Tax breaks and subsidies (Production-Linked Incentive Scheme) have arrived over the years to encourage the movement, especially in sectors, such as the production of smartphones, in which the direct competition is China.

The overtaking is therefore underway and the push is destined to increase this summer when the New Delhi Stock Exchange will become one of the great global financial hubs. Last autumn there was the first step: JP Morgan included the Indian market among the emerging stock exchanges, therefore among those in which to invest. And immediately there was a boom, with 4,330 billion dollars in capitalization and overtaking Hong Kong. Thus foreign investors moved from China towards Indian government bonds. With the entry of Indian government bonds into the JP Morgan index in June and then into Bloomberg in January, seas of liquidity are expected. And this is also a sign that the new China is called India.