Amidst escalating geopolitical tensions, particularly between the United States and China, veteran emerging markets investor Mark Mobius is backing India as a promising investment destination, with a keen eye on the defense and pharmaceutical sectors. Mobius, known for his expertise in identifying opportunities in developing economies, suggests that India stands to benefit from the shifting global landscape.

Mobius currently holds a significant portion of his investment portfolio in cash, citing global uncertainty and ongoing US-China trade tensions. He anticipates reinvesting once market volatility subsides, highlighting India as a country poised to capitalize on the evolving global supply chains. He is particularly interested in Indian stocks linked to software and electronics hardware.

India's appeal in a turbulent world

Mobius believes that India's strong macroeconomic fundamentals, coupled with its focus on local manufacturing, position it favorably in the current global scenario. Despite a recent GDP growth rate of 5.4%, Mobius considers India's performance commendable, especially when compared to the global average. He also lauded the Indian government's efforts in creating robust infrastructure to support economic expansion.

Defense sector: A self-reliance success story

Mobius is particularly bullish on India's defense manufacturing sector, recognizing the country's emphasis on self-reliance, technology transfers, and export-oriented policies. India is transitioning from being a major importer of defense products to a global manufacturing hub. Defense exports have seen a twenty-fold increase in the past decade, reaching ₹21,000 crore in FY24, with an ambitious target of ₹50,000 crore by 2029. This growth is fueled by allocating 75% of the modernization budget to domestic procurement and increased private sector participation. The government has set an annual defense production target of ₹1.75 lakh crore for FY25, with expectations to reach ₹3 lakh crore by FY29. The Indian defense sector is expected to grow at a CAGR of around 20% during FY24-FY29.

Pharma sector: The "Pharmacy of the World"

India's pharmaceutical industry is another sector attracting Mobius's attention. The country is the world's largest provider of generic medicines, holding a 20% global market share by volume. The Indian pharma sector has grown at 8% CAGR, with a 9% increase in export rates in 2024. The market size is currently valued at US$50 billion, and is projected to reach US$120 billion by 2030 and US$450 billion by 2047. This growth is driven by increasing lifestyle diseases, an aging population, and a growing focus on holistic health. India meets 20% of global demand for pharmaceuticals, including over 40% of generic medicines supplied to the US and 25% to the UK. The country also supplies over 60% of the world's vaccines and 70% of global antiretroviral drugs for HIV treatment.

Navigating challenges and embracing opportunities

Mobius acknowledges potential risks, such as trade negotiations and geopolitical tensions, but remains optimistic about India's long-term prospects. He also recognizes the importance of structural reforms and corporate governance improvements in developing countries. Despite a cautious stance driven by global uncertainties, Mobius's endorsement of India underscores the country's resilience and potential for growth in a complex global environment.