Finally, a slew of economic reforms including four rate cuts this year have started to pay off and stimulate growth in Asia’s third-largest economy. This is especially true as India picked up momentum with 7.4% growth in the second quarter (ending September). While this is far below the year-ago growth of 8.9%, it is up from 7% recorded in the first quarter and the market expectation of 7.3%, as per Reuters.

Bright Spots

A major boost to the economy came from solid progress in the manufacturing, mining and service sectors. Agriculture, industrial, automobiles and consumer durables are witnessing strong growth while investments are also showing signs of recovery. Additionally, current account deficit has narrowed and the currency has moved up significantly. Further, lower oil prices and rising consumer spending have added to economic strength (read: 3 ETF Areas that Investors Are Following the Most).

In particular, the current account deficit has narrowed sharply to around 1.3% of GDP in fiscal 2014–2015, below 1.7% in fiscal 2013–2014. Trade deficit in the first seven months of the current fiscal (April–October) contracted to $77.76 billion from $86.26 billion. Though inflation rose to 5% in October from 4.41% in September, it is expected to decline once the festival season ends. The central bank expects inflation to reach 6% by January 2016 and then moderate to 5% by March 2017.

Given the positive developments, India has now become the world’s fastest-growing economy, outpacing China, and remains a bright spot given that most emerging economies are struggling to revamp growth. The Reserve Bank of India expects the country’s economy to grow 7.4% annually for fiscal 2015–2016 and the World Bank projects economic growth of 7.5% for the current fiscal year, followed by further acceleration to 7.8% in 2016–17 and 7.9% in 2017–18 (read: Believe in T Rowe Price? Invest in These EM ETFs).

The Organization for Economic Co-operation and Development (OECD) also sees robust growth prospects in India compared to the other emerging markets. It expects GDP growth to remain above 7% in the coming years fueled by more structural reforms.

India ETFs to Buy

Based on a speedy recovery and bright outlook, we recommend investors to buy India ETFs at least for the short term. For interested investors, we have found a number of top-ranked ETFs in the broad emerging Asia-Pacific space targeting India that have a Zacks ETF Rank of 2 or ‘Buy’ rating and are thus expected to outperform in the upcoming months.

Among these, the following five funds could be good choices to play in the coming months and have potentially superior weighting methodologies which could allow them to continue leading the emerging Asia-Pacific space in the months ahead (see: all the Top Ranked ETFs).
 
iShares MSCI India ETF (INDA – ETF report)

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