There has been a greater focus on Asia recently in the news, mostly over the supposed success of “Abenomics” in Japan, growing tensions on the Korean Peninsula, and a slowdown in China’s economic growth. While these are all important for investors to consider when looking towards Asia for economic opportunity, one nation, India, has been flying under the radar for quite some time. As the world’s tenth-largest economy in terms of nominal GDP (third-largest when considering purchasing power parity), and growing, India represents a good place to invest for a lot of companies hoping to cash in on recent government incentives to modernize the nation.
So far, the incentives haven’t boosted domestic production, but they could be great for tech companies like Apple Inc. (NASDAQ:AAPL) and Sony Corporation (ADR) (NYSE:SNE), and for airplane manufacturing giant The Boeing Company (NYSE:BA), all of whom are making long-term investments to corner the country’s emerging market in smartphones, TVs, and airline travel; all critical for a nation that wants to modernize.
Boeing can fly away
When people think of Indian travel, trains overflowing with people are usually the first thing that springs to mind. While iconic, this isn’t exactly a modern way of travelling across a country as vast as India. This is where The Boeing Company (NYSE:BA) has recently stepped in with an agreement with Indian airliner Jet Air for an order of 46 737s over a three-year span. This would modernize the airline company for a projected influx of customers. According to some estimates, there will be 180 million people flying above India by 2021 as air travel expands, and the demand for new planes could be worth $175 billion over 20 years, which would be a lucrative opportunity for The Boeing Company (NYSE:BA) going forward in India.
Indeed, for any one of the world’s leading airplane makers, a rapidly growing market like India is enticing. It will lead to more people springing for air travel rather than train travel, especially as the economy matures to the point of sustaining multinational companies, which will require quick movement around the country, and modern airports to accommodate this increase. The Boeing Company (NYSE:BA)’s investment in the country now will yield big profits for the company, which will boost share prices and give investors good long-term gains, especially when markets like America and Europe are too mature to see the kind of gains that may come about from investing in emerging markets like India.
Cheap iPods a big, affordable play
Keeping with India’s modernization push, the growing middle class in the country will soon be demanding luxuries like smartphones and flat-screen TVs, things many westerners take for granted. Unfortunately for India, domestic production for screens and appliances is far from where the demand needs to be, meaning that India’s government has resorted to using government subsidies and investments in new technology plants to promote domestic consumption. However, this has had the effect of foreign companies like Apple Inc. (NASDAQ:AAPL), Sony Corporation (ADR) (NYSE:SNE), and Samsung jumping in and taking advantage of the subsidies offered. According to tech industry estimates, 90% of the demand for screens for TVs and smartphones is unrealized, leaving it to foreign companies to pick up the slack.
Apple Inc. (NASDAQ:AAPL) has the advantage in the future Indian smartphone market, after having recently released iTunes for India. Not only that, since India has yet to have a developed network on par with Europe or the U.S., Apple Inc. (NASDAQ:AAPL) is planning on selling older models of the iPhone and iPod at reduced rates, to have products working within the bounds of the nation’s grid, but also to make them affordable for a majority of Indians.
Estimates show that by 2017, there will be 156 million smartphones being used in India, up from 26 million currently in use. This is rapid growth in just four years, which speaks to the expectation of economic development in the nation by many industry experts.
