Experts from the fields of investment management and banking have stressed the potential of India to provide good returns on investment for foreign capital and called on US investors to tap into the opportunities here.
Speaking at the Indo-US Partnership Vision Summit 2021 organised by the IMC Chamber of Commerce and Industry, experts said foreign capital remains well positioned to see growth and will remain an integral part of India's development story in the near future. They also pointed out that while the equity market has seen robust growth, the capital market has to catch up.
Kaku Nakhate, President and Country Head (India), Bank of America said the outlook remains positive despite the ongoing COVID-19 pandemic. "The potential to earn is huge. Over a period of time, whoever has decided to remain here has always ended up making the right amount of money. But money has to be patient in India for it to really yield good returns," Nakhate argued.
Nakhate pointed out that equity markets have performed well historically and despite the COVID-19 pandemic, the results of companies have been good. She also said that India stands out among emerging markets for its growth opportunities and sectors like pharmaceuticals and technology will continue to see good traction.
"We have had reforms, we have opened up. Infrastructure investment trust (InvITs) and real estate investment trust (REITs) have been the new additions on the street. Now the public sector is also getting interested in that," Nakhate pointed out.
An InvIT is an investment vehicle that allows retail investors and institutions to invest in infrastructure assets like roads and power transmission lines to earn a small portion of the income as a return over a period of time. An REIT is a company that owns, operates, or finances income-producing properties.
Nakhate added that more regulatory support for cross border listings will help Indian businesses to tap into a huge pool of foreign investments offshore.
However, many experts pointed out that capital markets need to develop further to enable domestic investors to become a bigger share of investment source for the country. "The capital markets have grown from strength to strength but it is still not in line with the size of the $5 trillion economy that we need to go to," Nakhate said.
This was echoed by Sanjay Nayyar, Chairman of global investment firm KKR India, who said India would need foreign capital atleast for the next 2-3 years. "When the capital markets deepen and local flows from local insurance and pension funds become more robust, it can be a very virtuous cycle and not just a pure dependence on one form of capital," Nayyar said.
"India has been very promising in the past, and has delivered the necessary returns. I think that will continue going forward," he added
However, the main push towards supplying the market with credit would continue to be given by public sector banks and not private sector funds. "India's public sector banks have been the leading provider of credit for both domestic and foreign capital. They will remain so. Despite all the supplements we get from the private sector and capital market is great, the banks would remain the most important," Jaspal Bindra, Chairman, Centrum Group of Companies pointed out.
He added that the Centre has taken enough steps to address the demand-supply gap in credit to reduce the number of both unserved and underserved clientele. "There have been serious efforts to create scale on the supply side. The consolidation of PSU banks has been one such instance," Bindra said.
He added that the private sector has also shown that it can build scale and now the country has 4-5 large private sector banks which got licence relatively later.