India may have tumbled to the bottom on the investment priority list of global private equity and foreign institutional investors players looking to invest in the BRIC nations.
India may have tumbled to the bottom on the investment priority list of global private equity and foreign institutional investors players looking to invest in the BRIC nations, Mark Mobius of Templeton Emerging Markets Group told CNBC-TV18 in an interview.
He stressed that the additional investment coming in to India may be restricted because of the economic and infrastructure problems, slow growth and lack of privatisation.
"In order to encourage greater amounts we need to see higher growth and I don't see that happening unless there is concerted effort to privatize power and transportation industry. These are the two key growth areas that will help individual companies," Mobius said.
He said that China continues to remain top destination for foreign investors.
Below is the verbatim transcript of the interview:
Q: It has not been the best of start to 2013 for India after what has been a really good 2012. What has gone wrong in the last few weeks you think?
A: There are a number of aspects. Of course 4 percent growth that we are looking at is not good, it is actually pretty disastrous for a country like India that requires something like 7-8 percent growth. So that is the first issue. The Budget was quite a disappointment in my view. It did not address the issues of privatisation which is urgently needed in India particularly in the power sector.
Q: Do you think global investors like you would look at Indian growth more closely because a lot of the money which has come in since 2012 presumed that growth would bounce back, but we saw the worst Gross domestic product (GDP) growth print in many years just a few days back. Has that alarmed global investors like you?
A: Well it has alarmed me and other global investors who look at that very carefully. Another aspect is the fact that foreign investment inflows will not look too good going forward because of regulatory requirements. The problem of getting Securities and Exchange Board of India (SEBI) approval to bring money into the country is posing to be a big challenge.
Q: So you think the kind of disproportionately large inflows from global investors that India has attracted that might be a thing of the past?
A: If current conditions continue the way they are now, yes that could be a problem and I can understand why the government wants to increase foreign investments. However in order to do so they have to make it easier to bring money in.
Q: Off late the big regional scare though has come from China with what they are trying to do in the property market. How do you see that market and its impact on sentiment towards investors in this region?
A: It is true that China has gone through boom and bust pattern in their property sector. However China is still going to be growing at a rapid pace, at least 7 percent. This is mainly because Chinese have been encouraging investment not only domestic but also foreign investment.
Q: Do you see more damage to the Chinese market and what could it mean in terms of collateral damage to either commodities or even to markets like India?
A: I don't see much damage because there is a shift taking place in China from export orientation towards domestic consumption and this will power the Chinese economy going forward in the next five-ten years. So this is a very important change that will be beneficial not only for China but for the rest of the world including India.