You know, emerging markets better than anyone, and you I'm sure you also know
that for years, decades really investors have really been interested in the
promise of India. There is a focus right now, if you will,
on that country, on its economy and on its capital markets.
That seems much different than what that focus had been in the past.
What's changed? Well, I think that this focus you're
seeing on the back of Prime Minister Modi's visit here has a lot to do with
geography and size. The fact that there is such a
disenchantment with China and India is the only country of that
kind of size. And now also its
economic size has become and made it so relevant.
Are there lessons, though, that Modi can take from Xi Jinping and his move to
globalize the Chinese economy and avoid some of the maybe the missteps that Xi
Jinping made? Yeah, I think it's quite clear, which is
that as far as China's concerned, that if you look at China's development path,
it was a fantastic development. But it's only in the last few years that
it's cart derailed and it's got derailed because they took on too much debt.
It's got derailed because the state there has decided to become much more
interventionist, flex its muscle. And because China is, in a way, also
been retreating from the world and turning inward.
So what Modi needs to sort of realize today is that India is where China
should be or where China was about 20 years ago
or so. It should still be a country that's
opening up. It should still be a country that is
backing its private sector and not a country where the state is coming down
too heavily on the private sector and curbing the animal spirits of the
economy. So I think that's the key distinction
between India and China just now. But a lesson that Modi needs to take and
the other big lesson I'll say is one of complacency.
Right. That video of being fit fitted this way.
The entire world is talking this way about to go.
There is a tendency out of many countries in the world and even India in
the past of taking it easy or just sort of basking in the glory.
And when anyone has anything critical to see, the government shuts it down,
thinking that these guys are here to just spoil the party.
So I think that that they need to be very careful of that, that expectations
out of India are also very high. We were speaking a little bit earlier
this week about the unemployment rate in China, specifically among the Tom Keene
over 21 percent. India isn't that far behind, I think,
depending on what numbers are you somewhere around 17, 18 percent here.
So that's something that has to be addressed.
But it's also those same demographics that I think attracts a lot of
investors. The idea that they have a younger
population relative to China, younger working age population, as you say,
relative to China. Yes.
So the potential is huge. Right.
That this has always been there. But something which a line that I've
always repeated in India is that this is a country that has consistently
disappointed the optimists and the pessimists.
So the last few years, it has clearly disappointed the pessimists because it's
done much better than what the worst forecasts were.
Now, I think that we just have to be careful that India doesn't follow its
past pattern and disappoint the optimists as well.
So I think that this is about expectations, about controlling that,
about letting the numbers come through, because if you look at India today, the
amount of foreign investment that India attracts is still quite small as a share
of its economy. Look at numbers, you know, such as
foreign direct investment. The amount that comes into India is
about is down 1 percent of GDP. Now, when China was booming and really
sort of growing at a 19 percent clip, it was attracting foreign investment or
foreign direct investment in particular fields to 4 percent of GDP.
Even today, the emerging markets are attracting foreign investment of around
to two and a half percent of GDP. So we need those numbers now to come
through after this incredible amount of expectations and also outperformance
that we have seen in order to do that. They need to sort of, I guess, broaden
what's available to invest in. One criticism that I've heard from
foreign investors is that the Indian economy, at least in terms of what can
be invested in and they're primarily talking about public markets is way
narrower than what you're going to find in China and other emerging markets.
You even see that in a market capitalization, three trillion dollar
stock market compared to mainland China stock market, which is like twelve or
thirteen trillion. Yeah.
But that I think the stock market in India has done very well because, you
know, the Indian economy remembers also about 3 trillion or so.
But if you look at where the growth is being in the publicly listed company,
yes, the criticism is that a lot of the companies and industries they want to
invest in aren't public yet. So they either feel like they have to
find a direct way into those companies or they have to sit on the sidelines
until there's a listening for foreign investors and their track record of
being private investments in India is quite mixed.
So I think the public markets in India have done very well.
If you look at the breadth of companies in India and the diversity of the stock.
Market that's one of the best I know of any country in the world.
Has so many sectors represented out there from manufacturing to healthcare
to commodities. It's all there.
Technology like obviously is known. If you look at other emerging markets,
they tend to be very concentrated. You know, Brazil has one or two sectors
which are make up the market or even China got so sort of taken up by tech as
far as the good performing markets concerned.
So I don't think that's an issue as far as India's concern.
What's at issue today is just the fact that the valuations are very high, which
is reflective of the fact that expectations are very high out of India.
And those is why those need to come to now.
We need to see the numbers come through. And you can never have an attitude that
we don't spend the money go. It's got to come to India.
I think that that like attitude can be problematic.
So we are all sort of you know, I think that to do you'd have to be a very big
contrarian to take a bet against India, because the fundamentals do look pretty
good as far as India's concern. But also the fact that expectations and
the hype around India is something which is quite unprecedented.
So a couple of decades ago, I was going through some old news clips.
There were all these headlines. India's on the cusp.
The world needs a new economic powerhouse.
These are all stories written about India.
Yes. You know, 10, 15, 20 years ago here.
I'm curious if we have a chance to sit down, God willing, and 10, 20 years from
now, are we still going to be talking about India trying to become the next
big thing? Or will they already be that big thing
that see, India has always been incremental in nature?
Because if you look at the projections which were done there, you know, like in
terms of that, India is growing steadily.
Right. But it's always growing at a rate, you
know, which is very linked to how the global economy does, how other emerging
markets does do. So India has grown steadily.
It's been an incremental path. What we are now waiting to see is
whether there'll be a leading a shift in India's growth
trajectory. But the issue with, you know, as far as
China's concerned and India is concerned is the ability of India to carry out
massive big bang reforms is quite limited by its political economy.
I don't know if they because even if you look at Modi that in terms of if it's
come to really dismantling, you know, a lot of the bureaucratic and socialist
state, he's been quite tentative about that.
So it's not what China did. China, in terms of hit its peak boom
years, had a massive overhaul of the public sector enterprises.
They fired 80, 90 million people or something, you know, in terms of just
rationalizing the entire public sector. There's no chance in India you're gonna
get policies like those because there were political backlash will be huge.
The DNA is much more socially. So we have to be, I think, very mindful
of the Indian political economy and what the expectations are of us.
So I remain in terms of on my travels to India, quite optimistic.
And I remain optimistic because you have so many states in India that are
competing with each other to attract more foreign investment here.
We're dead to focus a lot more on Modi and what's happening in Delhi.
But remember, in India is a very federal society and you have a lot of states
which are doing a lot to attract investment.
That's makes me quite optimistic about India.