Tata Motors Limited (ADR) (TTM): India Isn’t China, So Bet On India?

India rivals China based on population. However, it hasn’t managed to achieve the same success as China in its industrialization efforts. Now could be a good time to invest in India with stocks that have international operations.

India isn’t China

China and India share many traits. For example, both have massive populations and a foundation in an agrarian economy. China, however, with its strong central government, has been better able to shift to an industrial model. India’s democratic government has actually stood in the way of that country’s progress.

Sharat Shroff and Sunil Asnani, co-managers of Matthews India Fund, noted recently that, “India’s often unfavorable policy environment has led some to eschew investing in India, and the past two years have been difficult given limited central government reforms. However, solid well-run businesses may still be in a better position to at least partly overcome these challenges.”

Demographics

Another problem facing India is the challenge of employing its massive and still growing population. Unlike China and its one-child policy, India’s population is still growing strongly. The country hasn’t been able to absorb all of its potential workers. A weak educations system is partly to blame, but so, too, is the government’s burdensome rules.

However, this could create an environment in which well run companies with global footprints can excel. This is so because they will increasingly have their pick of the top candidates. That isn’t to suggest that wages will stagnate, but simply that workers will gravitate to the best opportunities. That will likely be the companies that have reached beyond India’s boarders. Here are some names to watch:

Founded in 1981, Infosys is a global player in the consulting, technology, and outsourcing spaces. It serves customers from more than 30 countries. Its business, however, is far more global than that because it attempts to send work to where it can best be handled. Thus, it has over 150,000 employes from nations around the world, including The United States, China, Australia, Japan, and various European nations, among others.

In the company’s 2011-2012 annual report, it highlights that it believes the consulting industry is “rapidly commoditizing.” Management, however, doesn’t view this as a negative, it sees it as an opportunity. While opening offices around the world is one example of the way it differentiates itself, so, too, is its willingness to place employees in client locations when appropriate.