Gaurav Sinha is an asset allocation strategist at WisdomTree, an ETF issuer with nearly $40 billion in assets under management. He writes frequently about emerging markets, and India in particular. ETF.com recently spoke with him about the ongoing elections in that country—what Sinha calls the largest and most expensive democratic exercise in the world—and what they mean for India stocks and ETFs.
ETF.com: India is in the midst of countrywide elections. Would you fill us in with what’s going on?
Gaurav Sinha: Not many people realize how complicated elections in India are and how sophisticated the planning for the election is. The whole process runs over multiple weeks. It started on April 11 and will go until May 19. And then the results will be counted on May 23.
The constitution of India mandates that all citizens have to be less than approximately 1 1/2 miles from a polling booth. That means there are polling stations 15,000 feet above sea level in the mountains of the Himalayas and there are polling stations in lush, green tropical forests with tigers and leopards.
It’s the biggest democratic exercise anywhere on the planet. It’s also the most expensive one, estimated to cost $7 billion. For perspective, the last U.S. presidential elections costed $6.5 billion, which was at the time the most expensive ever.
These elections are a high stakes game for Prime Minister Modi, who, even after all the criticisms from the market liberals, continues to be the darling of the investment community in India and elsewhere.
Most likely, Modi will stay in power, whether it be with a clean mandate or with some sort of a coalition of like-minded parties.
ETF.com: How important are these elections for India?
Sinha: From an investment perspective, what matters for any country—especially in the medium to long term—is the history of reforms and the trajectory of economic and monetary policy, not who’s governing.
Either way this election goes, there’s no fundamental change in the opinion on India from a medium-term perspective.
Not many people realize India’s economy is almost the size of the United Kingdom’s. It’s bigger than France, Brazil, Italy and all of these other traditional economic powerhouses. It’s by no means a small economy at $2.5 trillion.
There are 1.2 billion people in India, similar to the population of China, and the economy is growing at a 7-7.5% rate for the foreseeable future. That makes it a great investment opportunity for the medium term.
The democratic setup of the country ensures that no matter who comes to power, it’s extraordinarily difficult to change the fundamental structures of the economy.
Even with the clean mandate that Modi had five years ago, when he won in 2014—the first clean mandate in 30 years of election history in India—he still had a tough time implementing some of the reforms.
He managed to implement a lot of it, but a lot of it still needs to be done. It wasn’t a cakewalk for him. What it means is that, tomorrow, if there’s somebody else in power, similar checks and balances of the democratic structure would make it so it’s not easy for them to reverse all the good things that he’s done. Fundamentally, India will continue to be on the same track.
