In­dia is bet­ter-placed to at­tract global in­vestors

The Pak Banker - - 6BUSINESS -

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.

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