Global investors have lately been asking themselves: “Is India the new China?” According to Morgan Stanley chief Asia economist Chetan Ahya, it may well be. At the start of the year Ahya called India “the best domestic demand alpha opportunity in Asia,” with the greatest chance of outperforming rival economies. “A virtuous growth cycle is unfolding,” Ahya said in a 12-page report last month. Nor is Morgan Stanley alone. Investment manager Bernstein is also optimistic on the growth story in India. “India may not match the pace of China during its [capital spending] spree, but given the more sustainable cycle, it is likely to last longer — the case of a few hundred-meter sprints vs. a marathon,” a group of Bernstein analysts wrote in a lengthy study in December. The firm forecasts Indian gross domestic product could top $10 trillion by 2034 — joining only the U.S. and China in boasting an economy that size. As China’s property market and deflation woes continue to rattle investors, India’s growth outlook appears all the more impressive. Real GDP growth came in at 6.3% in 2023 on a yearly basis, and Morgan Stanley forecasts the economy will expand by a similar 6.4% in 2024. Indian nominal GDP, unadjusted for inflation, could overtake Japan by 2026, the investment bank said. Growth in India might have been even faster or come sooner except for corporate governance concerns that have held back some parts of foreign investment. But prime minister Narendra Modi has helped to compensate for that through efforts to reform the economy — including heavy infrastructure spending — that have encouraged other overseas investors. “I never viewed India as the most business friendly environment over the years. But that is changing,” said Bill Fitzpatrick, managing director at Logan Capital Management outside Philadelphia. “They’ve now built a stronger base to spur private investment. Whereas China has done the opposite — and that has essentially stifled investment,” Fitzpatrick added. Where to look The Indian government allocated $134 billion for infrastructure spending in the current fiscal year alone. That comes as part of the Modi administration’s broader National Infrastructure Pipeline announced in 2019, which initially allocated around $1.4 trillion. “Anything associated with infrastructure is increasingly attractive,” said Quincy Krosby, chief global strategist at LPL Financial in South Carolina. U.S.-based investors can gain exposure to this trend through Dallas-based global infrastructure consulting company Aecom, Barclays equities strategist Venu Krishna wrote as part of a 124-page report last November. Aecom has already completed several public and private projects in India, and is engaged in urban planning and developments, he added. Last year’s annual report attributed strong revenue growth partially to expansion in the Middle East, India, and Asia, Krishna wrote. “More than revenue, India is an important area for sourcing talent” as well, Krishna wrote. India is also upgrading its 5G telecom infrastructure, which should benefit the optical and networking sectors, Barclays analyst Tim Long wrote in the same report. He highlighted Cisco Systems and Juniper Networks for their relationships with India’s major communications providers. “We expect growth from India to continue to drive CSCO’s overall APJC revenue – the company’s FY23 product revenue in India was up 62% y/y,” Long said, referring to Asia Pacific, Japan and China. He believes Juniper’s revenue will also gain as 5G investments accelerate. Barclays also named semiconductor companies as among those set to benefit from internal demand in India — as well as the government’s push to attract chip manufacturers to the country. “While the demand for chips from India is relatively small (c$24bn according to the government of India), we see that it could eventually become comparable to China’s current levels, suggesting a potential market in the order of c$500 billion,” Barclays analyst Simon Coles wrote in that same study. “If the demand for chips from India were to grow at these rates, it could help offset some of the potential decline from China. This would be positive for most semi companies given China contributes 20-30% of revenues typically.” According to Coles, U.S. investors can gain exposure through Tower Semiconductor , which is considering opening a manufacturing plant in India. Micron Technology is already building a chip assembly plant there, he added. Advanced Micro Devices is also investing in chip development and manufacturing in India. Qualcomm said in November that it would eventually outsource chip manufacturing to India after fabrication (fab) plants and outsourced semiconductor assembly and test (OSAT) facilities open. Growth potential For investors looking to gain exposure to the domestic stock market, Indian equities themselves aren’t especially cheap though. The benchmark Nifty 50 stock index , containing the 50 largest publicly-traded companies, currently sells for 23.2 times earnings, close to the S & P 500’s 24.6. .NSEI .SPX 1Y mountain Nifty 50 versus the S & P 500 over the last 12 months The two largest exchange traded funds in the U.S. to play India are iShares MSCI India ETF and WisdomTree India Earnings ETF , which are already 4% and 7.4% higher, respectively, so far in 2024. “You’re paying for the growth potential in India, certainly. And so I’d expect a premium valuation,” Fitzpatrick at Logan Capital said. While now may be a relatively expensive time to enter the market, Fitzpatrick notes that investing in India is mostly a longer-term story. “The only way you would look at India investments would be over a long period of time. They’re going to be very, very volatile in the short term, over a shorter period,” Fitzpatrick said. The rapid rise in foreign direct investments (FDI) in recent years have also contributed to elevated valuations, according to Krosby. The country received more than $80 billion in FDI in both 2022 and 2021. By comparison, FDI inflows were $36 billion in 2014. Still, Krosby believes India’s growth story makes it an appealing market, citing the burgeoning middle class and attractive healthcare and infrastructure sectors. In terms of India’s economic competition with its larger neighbor, “more was expected out of China” after the Covid lockdowns, said Krosby. Between the two, in investment terms, “India is seen as a safer destination,” Krosby added. —CNBC’s Michael Bloom contributed to this report.