The decisive win for the Congress Party in the recent Indian national polls, which saw the Hindu nationalist opposition and groups such as communists lose power, will boost India’s economic prospects although a new government must tackle huge budget deficits, Aberdeen Asset Management said.

Indian shares have rallied strongly: on Tuesday, the MSCI India index of the country’s leading shares was up by more than 20 per cent. Since the start of this year, the index has surged by 55 per cent, although that contrasts with last year’s 64 per cent plunge.

“The decisive result offers hope that economic and governance reforms will now move forward, although the huge budget deficit will continue to present a major challenge, with public opposition to subsidy cuts remaining strong,” Hugh Young, managing director of Aberdeen Asset Management Asia, said in a briefing note.

India, as one of the “BRICS” along with Brazil, China and Russia, has not been immune to the global financial turmoil. However, the populous country, which has also seen the rise of a large, affluent middle class, remains a key driver of emerging market growth.

A number of wealth management firms have sought to tap into this growth. Earlier in May, it was reported that JPMorgan intends to launch private banking operations within 12 months; UBS is expanding operations in the country.

“Growth is likely to fall to around 4 per cent this year from around 8 per cent in 2008, but in the context of conditions elsewhere this is impressive. India's economy is more domestically oriented than those of other emerging countries,” Mr Young continued.

“Its export sector is more related to provision of services, such as call centres and software, than it is to the manufacture of goods, demand for which has been so badly battered,” he said.

“Overall, we expect India's growth to hold up reasonably well, and think that its stockmarket presents good long-term investment potential at current levels,” he said.

Aberdeen holds banks such as HDFC, attracted by its strong balance sheet and well-established brand. Aberdeen also holds Infosys, India's largest IT company, as this firm remains a strongly competitive business globally.