Is this the most attractive investment destination of the next decade?

A key aspect is India's very young - and growing – population, which creates a very structural kind of growth.

India has recently overtaken China as the most populous country. Its 1.4 billion population has a median age of 28 years, and it is going to add 200 million people to its workforce between 2020 and 2050, according to UN estimates.

A lot of goods and services sold in the country have a very low penetration level. The country is underbanked, for example. There are low levels of penetration in mortgages, which is around 11% of GDP in India, versus 32% in China, and 52% in the US. And only 3% of Indian households have credit cards, versus 22% in China, and 70% in the US.

In many consumer segments such as air conditioners, and vehicles, the penetration level is very low. So, as the GDP per capita of the country expands from the current US$2,500 level to around US$5,000 level in future, there's going to be a lot of demand for products including cars, consumer electronics, mortgages, and credit cards. 

India sold 7 million air conditioners last year in a very hot country, compared to China, which sold a hundred million air conditioners. So you can see the kind of difference.

And as income levels grow, the S-curve effect will kick in and we'll see a sustainable, high growth rate there. So all these characteristics lead you to a structural growth of around 5-6% in GDP, which I think would be a very positive thing in the low-growth world that we are living in.

One of the key risks is always the execution risk. 

When we are talking about attracting these investments, how much is the government able to commit to infrastructure spending? What is important to know is that the direction is right, and even if they are able to do half of what they are trying to do, it's still going to add a lot of value to the economy.

The oil price is always a risk. India is one of the largest importers of oil in the world. Given the current geopolitical environment that we are living in, although at the moment oil prices have been very well contained, it is something that we will always be looking out for. 

Plus, there are elections in India, the general elections next year. These will place some kind of pressure on the government to increase welfare spending because of the fact that, if there's a change in dispensation or the current government gets a lower number of seats in the parliament, there can be a slow-down in decision-making.

These things are more medium-term risks. India is still the largest democracy in the world. The power transitions have always been very smooth. And in the end, what we are looking at is the direction of policy reforms. 

Whatever government comes in, we know that there might be short-term ups and downs, but the general direction of the government policies is positive.

Investors should be very mindful that India is a stockpicker's market. 

If you look at the overall valuation of India, it has always been higher compared to some of the other markets in the region. 

The price-to-earnings ratio of India at the moment is around 21x. If you look at emerging markets, next year it'll be somewhere around 12x. The price-to-book ratio is also higher. Not just to compare it with other countries, but also, on price-to-earnings it's slightly higher than average. 

What it hides is that there is a very large disparity among the stocks within the country. 

So you can find very good quality stocks which still do not have high valuations. It is very important to look under the hood and see where the investment opportunities are when you're investing in India.

HDFC Bank (NYSE: HDB). This is the largest private-sector bank in the country. It benefits from the structural growth which is happening. 

As more and more people use mortgages, loans and credit cards, this structural growth will benefit the bank. 

It's a very high-quality bank and a very strong franchise, with a very strong brand, technology, and consumer focus. Because of that, they are able to take market share from the less efficient government-owned banks.

Government-owned banks are around 77% of the system now. Over time, their share both on the deposit side as well as on the loan side is reducing and private sector banks are taking market share. HDFC Bank, being the most efficient and well-done bank, has been taking a lot of that market share from these banks.

If you look at the banking sector in the last 15-20 years, as a system, the return on equity of the system actually fluctuated between 15-16% positive to negative 2-3%. If you look at the public sector banks, the fluctuation was much more - from 15-16% positive to 15-16% negative. But if you look at HDFC Bank, it has always had that 15-20% range of return on equity over this whole 20-year cycle.

We think it is one of the best banks in the emerging market space.