Almost a year has passed since Narendra Modi came into office with the promise of improving India’s long-term economic outlook with much-needed reforms to attract foreign investors, and market sentiment around India has subsequently become significantly warmer.
But while investor optimism remains strong – including those who believe the reforms are not even necessary – there is yet to be a palpable impact. Regardless, Parks, Invesco’s head of Asian equity, is comfortable playing the long game.
“If you look at where Indian economic growth had fallen to before the pick-up relating to the rise in confidence when Modi came in, it looked like we were falling back into the dark days of 4-5% growth and the fears that the economy could stagnate,” he said.
“Reforms are needed to get growth up to 7-8%. Forming a democracy is more important than having a one-party state, which is what Modi is doing.”
While there are encouraging signs, such as foreign direct investment into India in the 12 months to February totalling £21.3bn – a 38% increase on the year prior – there is still work to be done.
However, Parks went on to say that market expectations of seeing the impact only a year on are unrealistic, outlining the long-term nature of restructuring such a diverse economy.
“It is an immensely complex programme,” he said.
“Modi is pushing to make doing business in India much easier. Road construction is going up, there is more power availability and construction of transmission lines is being restructured, so the building blocks are in place.
“The market’s expectation for it to happen in one year are exuberant. But in the next two or three years we can expect to see the positive effects.”
Parks’ conviction translates to his portfolio, where India represents his biggest overweight at 14.38% of the IP Asian Fund, alongside significant sector exposures to financials and IT, which stand at 34.7% and 24.78% respectively.