The Economist reports this week that India is overheated. It uses a slew of financial metrics to make its case. Some, such as the current-account balance as a percentage of GDP, seem a bit esoteric. Others, such as the fact that Indian manufacturing companies lost an estimated 8% of sales each year because of disruptions in electrical power, seem quite obviously problematic.
Reading the story is like getting a bucket of cold water thrown at you. But is it warranted?
Granted, the Sensex, India’s version of the DJIA, is up 200% over the last two years. Internet stocks are trading at upwards of 75x earnings. The overall P/E ratio for Indian Exchanges sits at something close to 20. If it was the U.S., and we were talking about the Nasdaq, I would be nervous. Wouldn’t you?
I’m in the middle of writing my own story about venture investment in India. Please leave a comment, email me (firstname.lastname@example.org) or give me a call (415-344-3996) if you feel strongly about the investment situation in India or have a particular insight that would be valuable to the readers of The Venture Capital Journal.