Gerry Grimstone is the India champion at UK’s Financial Services Sector Advisory board. He is also the chairman of Standard Life, which partners HDFC in India for its insurance venture. Gerry also heads Cadaver, which is a private equity investment firm. It is one of the bigger private equity players in Europe managing about 8 billion euros of funds. Its investments could run up to over 50 billion euros all over the world.

Grimstone said investors still have some way to go yet before poise and calm returns to the markets. He feels it is important that India maintains its competitiveness. "India has to carry on with liberalisation. Some politicians are thinking hard about it. I have absolutely no doubt that India will benefit from liberalisation. India is a strong country with strong businesses. There should be much more two-way traffic between India and the rest of the world."

A: We are trying to find ways in which we can put things back into India Financial Services. Financial service companies around the world are keen that India should liberalize. It is easy to say that. The world has put forward the intellectual arguments in favour of liberalization, sometimes these arguments seem a bit abstract to people on the ground here. You have a complex political situation in India. It is important to deal with the realities of that. It is important to show to the Indians and the customers here that there is some direct return for liberalization at Financial Services.

A: We speak largely to the Indians. It is sort of a two way street. Financial services are a very complicated industry. We thought it would be helpful to India and the UK to try to bring some of these big and small firms, with sometimes diverging interests, together into a single voice. It sounds very grand being India Champion, it is not quite as grand as it sounds. We are just trying to be helpful.

A: People are still quite uncertain even though this started last August. One would have thought six months into that and people would see their way forward. People are still not quite sure of which way to go. When investors are uncertain, the bigger ones tend to hang back until some certainty emerges. So, we still have some way to go yet before poise and calm returns to the markets.

A: There is certainly volatility at the moment. That could be quite unsettling for small investors. Large institutions see their way through that, but there is always a bit of risk that when you have volatility small investors will pull back. In the UK, we have seen people who are looking for safer homes for their money such as high yielding cash increments. They are just pulling back a bit from the stock market. These people who have been old timers in this game do know that these things go backwards and forwards.

A: Inflationary pressures are also rising. They are rising everywhere. That keeps central banks in a bit of a dilemma. They are being pulled in two directions. One is controlling inflation. We have seen some successful action by the Fed, ECB, and the Bank of England. They have to deal with the credit crunch and problems that gives and put liquidity into the market. I have great sympathy for the central banks. They are doing a difficult job at the moment. They have to face it both ways.

A: We have seen quite dramatic changes of course in the last few weeks and often once you’ve seen dramatic changes, things then sort of settle down afterwards and we have a lot of very expensive experts to look at these things, so I am always a bit coy about giving my own views on these matters but we are all hoping for a period of clam after the events over the last few weeks or couple of months.

A: We had all hoped that market liquidity would start reasserting itself because a lot of the money has been pumped into the economies by the central banks and the issue of course is, when you provide a lot of funds from the central banks and practitioners can get well used to that as they get rather drugged on the money that’s coming from the central banks. What’s important is that market mechanisms start to reestablish themselves and the issue there is that we still have quiet a lot of uncertainty in the market and banks are still looking at each other and people are quite sure that we have bottomed out of the whole of this crisis yet and it is going to take that bottoming out to occur in terms of the perception for things to really start getting better.

A: It’s interesting how food prices are beginning to rise quite sharply here and one has seen it happening both in China and India and energy prices are also rising and of course these things have a very direct impact on consumers and on people’s perception of inflation. But the great thing of course you have in India and elsewhere is the underlying economic growth and even at the stock market may be depressed at the moment in India but I think you can almost see-through that here, if you’re an investor. Indian companies are doing very well and of course the big change in my lifetime is, the self-confidence, which the Indian companies now show overseas. It was very telling, the point that the British Prime Minister made here when he was here last month that the UK and India see themselves as absolutely standing shoulder to shoulder and you may remember that he was saying that India should be a full member of the security counsel, India should be member of the G-7 and we like to think ourselves as probably the world’s oldest democracy now teamed up with the world’s largest democracy and that UK and India can do much more together in that way.

A: Maybe not such big deals but companies balance sheets are still very strong and the great thing about the Tata-Corus deal was how well-received it was and I think it is brilliant that an Indian company such as Tata can make acquisitions in the UK such as that and 20-30 years ago, there might have been some public reactions to that but now it is very much welcomed in the UK as part of these global flows of finance and of business.

A: We see Asia as very exciting for private equity. We look at private equity in Asia and we see the same kind of situation as you had in the US and Europe, may be sort of 10-15 years ago and the larger amounts of leverage aren’t there that were there 12-months ago but private equity is a long-term business and a firm like ours. We are conservative and one of the leading European firms and we thought it was absolutely important to be in Asia going forward and not lease because a number of our companies in which we invest in are very active in this part of the world and manufacturing things here, setting things here, distributing things here and everything is so joined up nowadays and I don’t think you could be a successful business in private equity without having some insights into Asia.

A: We are particularly interested in the services sector. We are particularly interested in things that deal with customers, more particularly businesses that have good cash flows. The nature of those businesses is that they tend to do well through all parts of the economic cycle. For example, outsourcing in India. It does well both in good and bad times. Sometimes in bad times, people are looking at ways to rationalize their businesses. While cutting costs they think of outsourcing. Sometimes when their business is growing, they think of outsourcing. So,, it is one of those occasions where you can do both in two different climates.

A: There might be some slowdown in the short-term. The trend that is leading towards more outsourcing will surely continue. There has been both a rate benefit to India and for the companies that India is going for.

A: It is important that India maintains its competitiveness in this area. India has some tremendous inbuilt advantages like a very educated workforce, high skills in English, and high standards of service. It is a competitive economy. There are other countries out there who are trying to do what India is doing. It is important that India maintains its competitiveness.

A: India has to carry on with liberalization. I understand why some politicians are thinking hard about it. I have absolutely no doubt that India will benefit from liberalization. India is a strong country with strong businesses. There should be much more two-way traffic between India and the rest of the world, and that goes for financial services as well as other sectors. If we could all make financial services stronger in India, India will benefit, the rest of the world will benefit. I think Indian financial services companies will benefit as well.

A: We have to be imaginative and look at imaginative ways of doing it. We must not close our minds to new ways of thinking. We all have to think how we can develop financial inclusion and financial literacy in India. We have to find ways of helping training and bringing financial services to parts of the community where perhaps they haven’t been traditionally. If in 10 years time, we can look back and say that financial services was much more widely spread in India and if the international community had done something to help that, it would then be a job well done.

Q: That is very much the goal of the central bank over here, though it is not its central role. It is a monetary policy setting authority, but it has taken it on itself to spread financial inclusion. In fact, it has made it one of its mandates. But coming back to the issue of more outsourcing, more trade, and more links that India must forge with the outside world, one of the key things that developing countries including India keep mentioning at the Doha round for instance, is the free movement of services and Indian labour. Do you see that happening in the next couple of years or so? Do you think the Doha round will be successful in that angle at all?

A: Unfortunately, it has been a much slower process. I think it is very important that India and friends of India, like the UK, keep pressure on other countries to do that. The world would be a better place if the Doha Round can make progress.

Q: Since you also represent Standard Life, does it often frustrate you that the liberalisation of the insurance sector is taking so long in India?

A: Of course we would like it to go faster. But with our very good friends at HDFC, we have a tremendously good business in India. I look at the rate that it expands at, the young people that we train and the customers who buy products. I think we are so lucky to participate in something as exciting as life insurance in India.

Q: Is there anything that Standard Life has on the anvil, in terms of capital, that it will bring in? Separately, are there any numbers you are looking at as the Head of Candover, in terms of what kind of money you will bring in for investments?

A: I cannot give you an exact figure. But certainly in the life insurance world, both HDFC and ourselves are very ambitious for our business in India. We have already talked about the possibility of an IPO of that business in due course.

Q: Would that be in 2008?

A: No date has been set yet. We have said some time in the next couple of years. It depends a bit upon market circumstances. But we are ambitious for that. I am sure the flows will carry on increasing coming into India.

Q: Is there anything that you have already set your eyes on? The Mumbai office will open in 2008. But would you also be picking up some investments?

A: It is too early say yet. We hope so.