In the October update of its World Economic Outlook, the International Monetary Fund (“IMF”) raised its growth forecast for India by 0.2%. According to the IMF, as quoted on CNBC, India is expected to achieve a 6.3% economic growth rate in 2023, surpassing its earlier projection of 6.1%.

India’s Bullish Economic Outlook

Economists have an optimistic outlook on India, with the country’s economic growth being attributed to an uptick in consumer spending, notable infrastructure investments and a surge in new business establishments.

According to Alicia Garcia-Herrero, chief economist for Asia Pacific, as quoted on the CNBC article, the bullish outlook on India’s economy is supported by robust consumer spending. Boosted by youthful demographics and a rapid expansion of the middle class, the world’s fifth-largest economy is projected to grow by 6.3% in 2024, with the IMF retaining its growth projections.

However, the widening current account deficit, resurging inflation, and increased geopolitical tensions could act as headwinds for India growth prospects in the short term. With the country being highly dependent on imports for its energy needs, volatility and surging oil prices caused by tensions in central Asia could be a negative for the country.

According to Harvad Business Review, as per Goldman Sachs, India is projected to become second-largest global economy by 2075. According to Martin Wolf of Financial Times, the country’s purchasing power is estimated to be approximately 30% larger than that of the United States by 2050.

Festive Month to Give a Boost

Consumer consumption is anticipated to receive a boost with the country's festive season starting. According to RedSeer,monitoring over 100 platforms and encompassing 90% of online sales,up until mid-November, it is anticipated that online consumers would spend a record $11 billion, an increase of about 20% from the previous year, as quoted on Reuters.

According to Reuters, with consumer spending constituting 60% of India’s GDP, the country’s central bank’s recent report indicated that consumer confidence reached a four-year peak, supported by stabilizing inflation and strengthening employment conditions.

According to the Business Standard, online retailers and e-commerce firms areexperiencing robust sales this festive season. Analysts and industry sources reported a more than 15% increase in e-commerce order volumes during the initial days of their recent sales events compared to the previous year.

Per Business Today, in September, car sales achieved a historic high, driven by festive season bookings and the introduction of new car models. Increasing car sales indicate surging consumer confidence and a rise in consumers’ purchasing power, reflecting a positive correlation with the country’s GDP.

Cricket World Cup Gives Additional Support

Being the most popular sport in India, the start of the International Cricket Council's World Cup in a cricket-obsessed nation is anticipated to provide a temporary economic boost as fans indulge in their favorite sport. As quoted on Mint, the sporting event is projected to boost the country’s economy by nearly $2.4 billion, according to an estimate by Bank of Baroda economists.

Coinciding with the festive season, which is expect to last till the end of the year, the cricket world cup is estimated to benefit the retail sector, with people likely to make "sentimental purchases" of merchandise related to the tournament. Companies are anticipated to capitalize on the consumption boost, with the tourism and hospitality sector poised to receive an uptick in activity.

ETFs in Focus

After five consecutive weeks of outflows, amounting to nearly $5 billion, ETFs monitoring emerging markets have finally seen a turnaround. During the week ending on Oct 13, investors injected about $228 million into these funds, withIndia recording the most significant inflow, totaling $132.5 million, according to Bloomberg.

As quoted on Mint, according to Aranu Chakraborty, the chairman of HDFC Bank, India’s economy is forecast to hit the $30-trillion mark by 2050. India is poised to maintain its position as one of the fastest-growing global economies in the coming decade.

While India faces short-term challenges due to mounting global headwinds, the nation's long-term economic growth prospects remain robust. Investing in India ETFs with a prolonged investment horizon can offer substantial benefits for investors.

WisdomTree India Earnings Fund (EPI Quick QuoteEPI - Free Report) ) – has earned 20.16% over the past year (as of Oct 17)

iShares India 50 ETF (INDY Quick QuoteINDY - Free Report) ) – has earned 10.19% over the past year (as of Oct 17)

iShares MSCI India ETF (INDA Quick QuoteINDA - Free Report) ) – has earned 8.82% over the past year (as of Oct 17)

Franklin FTSE India ETF (FLIN Quick QuoteFLIN - Free Report) ) – has earned 11.75% over the past year (as of Oct 17)

Increased Focus on Digital and E-commerce India ETFs:

According to Reuters, citing a Nielsen Media India report, Amazon officials noted that over 80% of urban consumers plan to shop online this festival season, with half of them willing to spend more than last year. The e-commerce market is estimate to grow to $350 billion by 2030, from being valued $63 billion in 2023.

Investors can look into funds like Columbia India Consumer ETF (INCO Quick QuoteINCO - Free Report) , India Internet & Ecommerce ETF (INQQ Quick QuoteINQQ - Free Report) and VanEck Digital India ETF (DGIN Quick QuoteDGIN - Free Report) . These funds have grown 18.22%, 10.31% and 18.02% over the past year (as of Oct 17).