[Written in response to an argument that India is the place to invest in the next 25 years, due to its advantages in demographics, culture of education and experience with knowledge work.]
Assuming China will not stand still during this run, for India to cross China in GDP terms in 25 years will require a CAGR of around 8%. It's possible, but many stars need to align. The few examples of economies growing at these rates over 2+ decades time periods (China, S. Korea, Japan, Singapore), each had unique characteristics, but one major common theme was export orientation. If this current trend of de-globalization continues, this will be strong headwind for India. However, it might also be a blessing in disguise, forcing India to grow by internal consumption, unlike what Japan and China did in particular, and suffered for.
Next, how will this GDP expansion reflect on the stock market. This is much harder to predict. India has a leg up on all these economies in that it already has a well established stock market, open to foreign investments, making it efficient and liquid.
So far, the rupee has depreciated against the dollar and other major currencies steadily at 2-3% rate per year for decades. I have no idea if this trend will change if India gets on that GDP hockey stick. But if the currency exchange tax does continue, it'll be significant drag.
So, if the overall market grows at say 8-10% over 25 years (yes, I am conflating GDP growth and stock growth - sorry, I don't know any better), with a lots of uncertainty and choppiness in between, with a 2-3% currency tax, is this a viable investment for many of us that are the Indian diaspora in the USA? That's an individual decision, for sure.
I came to the conclusion for myself that it doesn't make sense to invest my dollars in India. However, I am considering investing any rupees I may have in the India market, instead of repatriating it immediately to the US. (Dealing with taxes in two countries does give me a pause though).
