Edward Stileman, Fund Manager of the Waverton Asia Pacific Fund assesses Narendra Modi’s first month as Prime Minister of India…

It will not be easy for Narendra Modi to rapidly turn around the Indian economy.  For the time being, it is right for the RBI to maintain a more hawkish tone – at least until there is concrete evidence of genuine supply-side reform. This will take time but Modi has the mandate to make it happen. He has started well by rationalising his cabinet and raising rail fares in the first few weeks of his term.


Over the next couple of years, India should benefit from both cyclical as well as structural forces. For example, non-agricultural GDP growth currently rests at a twenty year low; whilst industrial production declined last year for the first time in 30 years.  Additionally, gross fixed capital formation has ground to a halt. With animal spirits returning, one suspects that these components of GDP (and others) may begin a mean-reverting process leading to a pick-up in the economy and company profits (which have declined for the last three years).


Everywhere across Asia, ‘reform’ is the watch word, after several years of cheap money and lazy, populist governments. It took a coup in Thailand to get the reform machine started again, and one hopes that a Jokowi election victory on 9th of July will spur Indonesia on to more sensible macro policies.