Allianz Investment Management Pte CEO & CIO Asia Ritu Arora sees 2022 as a strong year for India, with a double-digit growth a real possibility. It will also be the year when global economy will normalise after a sharp recovery in 2021 purely due to the base effect, says Arora.
Allianz, which has joint ventures with Bajaj Finserv in life and general insurance businesses, is deeply committed to India and thinks of it as an attractive investment destination, she says.
For her, the biggest risk is the economies coming out scarred and shrunken from the coronavirus outbreak. It is extremely important that policymakers continue to provide support to ensure jobs and livelihoods are sustained, Arora says in an interview to Moneycontrol’s Sunil Shankar Matkar. Edited excerpts:
Q: Economic data indicates a gradual recovery. Do you think there could be flat growth in FY21, and double-digit in FY22 due to a low base?
Most economic indicators confirm that an economic recovery is underway, which, in our opinion, is K-shaped. Certain sectors like tech have done exceedingly well, while others like tourism have lagged. On a global basis, 2021 is likely to witness a sharp recovery purely due to the base effect followed by a normalisation in 2022. Even for India, FY22 will likely be a stronger growth year, with a very real possibility of double-digit growth. Meanwhile, news of emergency approval for vaccines and the 90-95 percent success in trials from three different companies—Pfizer, Moderna and AstraZeneca—could prove to be an upside risk. However, this exuberance needs to be balanced as COVID-19 is spreading across the northern hemisphere at record high rates with the onset of winter and holiday season.
Q: What would be the risks for the Indian and global economy over the next year?
The biggest risk to the economies today is the extent of permanent scarring that is caused by COVID-19. Even as we see good progress on vaccines, there still exists the risk that economies come out of COVID-19 scarred and shrunken. It is extremely important that policymakers continue to provide support to the economy such that there is adequate aggregate demand to ensure jobs and livelihoods are sustained. Beyond this, there are developing risks related to trade, geopolitics etc, which are especially relevant for Asia. All stakeholders, including market participants, are closely watching out for the direction that the new US administration takes once in office.
Q: India seems to be a favourite country for FIIs as western countries face COVID-19 pressure. Do you think the flow of money will continue?
Allianz is deeply committed to India and definitely thinks of it as an attractive destination for investment, owing to its favourable demographics, long-term growth trajectory, high-quality corporates and strong institutions. India has many positives going for it and yet to realise its full potential. Reforms like IBC, GST, RERA and ease of doing business are path-breaking and should play out extremely well in the long run.
Q: Do you think there could be policy shifts and easing of global trade war after Joe Biden takes over as the US president?
There is an expectation that the Biden presidency will bring more predictability and leadership to the world. He is likely to follow a multilateral approach with the rhetoric dialled down. He is also expected to work closely with the USA's traditional allies. Predictability of policy is likely to reduce volatility, which should be positive for risk assets and EMs (emerging economies), including India. The pressure on China on issues like tariffs may continue.
Q: Will India achieve its $5-trillion economy target by 2024?
COVID-19's economic shock was deep and unprecedented. It is heartening to witness the bounce back in economic activity. However, full recovery in terms of output is only expected by 2022. We see this pattern across most global economies, India being no exception. The ambition of becoming a $5 trillion economy remains firmly on track but given the pandemic, it is only logical to expect some delay.
Q: Do you think India will become a manufacturing hub even though there is competition from countries like Indonesia and Bangladesh?
India is already a world leader in offshore services. India also increasingly does well in knowledge-driven manufacturing like automobiles and pharma. It also has the third-highest number of unicorn start-ups competing against global giants in an open market. Therefore, the ability, confidence and resolve to compete and 'win' definitely exists. The manufacturing sector is likely to get stronger as structural issues such as labour laws; high industrial and power tariffs are resolved.
Q: What are the sectors that look attractive on the global front and can be a part of India's exports?
India is well poised to substantially increase exports. It is important that we focus on sectors and products where we have a competitive advantage, inherent strength, and unique proposition. It is important to identify what all is it that India can competitively scale up, then successfully 'Make in India' for the world.
Q: What has been Allianz's investment strategy in India and what are your plans for the coming months?
Allianz has a long-lasting insurance presence and commitment to India through successful JVs with Bajaj Finserv, as Bajaj Allianz Life Insurance and Bajaj Allianz General Insurance. Allianz also has established a re-insurance company in India, Allianz Global Corporate and Speciality.
India is one of our key investment markets. Allianz has made significant commitments in Indian infrastructure such as roads, and commercial real estate over the last three years. Allianz is also actively working in the private debt space in India, providing the much-needed debt capital to Indian SME and MSMEs in segments where banks are hitherto not active. In addition, Allianz has significant exposure in the private equity and public equity and fixed income markets in India.
Hence, Allianz commitment and investments in India are multi-faceted and structural. We believe India’s structural growth story remains attractive and will naturally attract greater allocations from global investors.
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