At the heart of the conflict is India’s silent dedication

India is a leading player in the international political arena and already occupies a unique position in the emerging world. As a key partner in Asia for Western democracies versus China, India has remained pragmatic to protect its economy from commodity supply shock. India’s economy has been profoundly transformed in recent years, something which has not been fully understood by investors, and this explains the surprising performance and resilience of the market in our view.

Geopolitics

It is often said that each crisis is an opportunity for renewal and a change in standards. A lot of ink has already been spilled over the consequences of the current war in Ukraine, but sometimes silence says just as much. This silence is that of the United States and Europe with regard to India’s attitude and its non alignment. Although Joe Biden recently criticised India’s decision to increase its purchases of Russian oil, these accusations are very timid compared to those against China, which is being called upon to take a position.

This relative silence is explained by India’s status as a major ally to help contain an increasingly unpredictable China. India is a major ally to be cultivated, one which intends to play its role but not under just any conditions and which will not sacrifice its own interests in the name of alignment. The West needs a strong India. The country has understood this well and intends to capitalise on this almost unconditional support, while the neighbours worry.

The economy

India is fully aware of what it represents, politically, but also economically. Let’s mention another silence, that of the disappearance of the sound of footsteps at airports.

Where, in the past, Indian technology institutes formed a diaspora – evolving now in leading spheres – at the service of the U.S. technology sector, now the majority of these students are remaining in India, aware of the opportunities available to them there, at a time when previous generations of immigrants are reinvesting in their native land in order to capitalise on its potential. Indian engineers, for whom Indian IT services companies have been the only domestic outlet so far, now have many more options, including internet companies and start-ups, that are taking advantage of the boom in the digital economy in India.

Markets

In this context, the Indian market has also defied all predictions: due to its premium compared with other emerging financial markets, its sensitivity to commodities - particularly oil - and its remarkable performance last year, many were ready to bet on a sharp downturn in the stock market.

In reality, the Indian market has held up very well since the start of the year, with growth of 4.8% vs. a 2.8% decline for the rest of the emerging countries (in EUR at 06/04/2022). Investors who are already present are likely setting their time horizon for the next decade, not the coming months.