India is better-placed to attract global investors
DUBAI: Indian economy is resilient despite a global downturn and its relative robust growth is attractive enough for global investors in a world largely devoid of growth, a leading asset management expert said. "Valuations are tad below long-term average and earnings growth is expected to revive this year," said Vikas Gautam, chief executive officer, Aditya Birla Sun Life Asset Management Company Ltd. Speaking to Khaleej Times, Gautam said his company has a very strong investor base in the GCC thanks to a host of products and services offered to suit the requirements of investors.
"We hope to see a rising demand for our products and services from investors in the GCC on the back of India's strong growth prospects." "India is predominantly a domestic demand driven economy and the government's inclusive growth initiatives on infrastructure spending, and lag effect of the seventh pay commission are helping to maintain strong growth," he said.Gautam noted that most macro fundamentals have improved in India, albeit aided by lower commodity prices.
"While the current account deficit has benefited from lower energy and other commodity prices, strong FDI inflows have ensured India's external balance less dependent on volatile portfolio inflows. "There is a gradual recovery in economic growth and Reserve Bank of India's focus on inflation control has put the real interest rate firmly in positive territory. RBI's reserve accretion has increased India's import cover to almost 11 months. Improved macro fundamentals, positive real interest rates, strong external balance, Forex reserve adequacy and low external debt are positives for Indian rupee," said Gautam.
The World Bank and the International Monetary Fund have predicted that India would remain the fastest growing large economy in 2016 at 7.8 per cent far outpacing China's growth of 6.7 per cent as the world economy as a whole would grow at 2.9 per cent. "India should matter more for Indian investors. The trade similarity of India with China is low and hence there no issue to severe competition from China. The lower commodity prices are positive for India as it goes ahead with its investment in infrastructure," Gautam said.
However, much lower commodity prices for prolonged period may be negative due to total risk off globally, he said. "Even if there is a risk off due to companies or countries going bankrupt, the solutions are themselves self-correcting. In such a situation, the bounce back can be swift. It is very difficult to predict such an event and its timing. The key is to be invested in strong companies, performing funds and not to take leveraged bets. India provides a great opportunity of sustained economic growth and its markets provide large set of diversified companies one can choose from for their investment," said Gautam. Normally, US rate hikes result in a flight to safety to US, leading to trouble in emerging markets. The vulnerability depends on level of external debts, foreign exchange reserves, current account deficit and the state of the economy amongst other things. However, unlike other emerging markets, the impact of future US interest rate hikes on capital flows out of India will be very less. "In fact, strong macroeconomic fundamentals are likely to attract more investors to India," he said.