'Getting into global debt, equity indices can fetch us USD 100 billion'

New Delhi: Nilesh Shah, noted fund manager and a part-time member of the Economic Advisory Council to the Prime Minister, on Monday said the country cannot achieve its growth ambitions without foreign inflows and pitched for joining global bond indices to attract more funds.

Citing the case of China, which recently joined a few global indices, Shah said we can attract up to USD 100 billion through such a move. According to experts, the foreign holding cap imposed by the RBI in public debt has deterred inclusion of the country in such indices.

"Our savings of 30 percent is not good enough to generate 10-12 percent growth that we require. We have no option but to get foreign capital so that our growth can accelerate, and becoming a part of the global equity as well as fixed income indices will help us get larger allocation of long-term funds," he said.

Speaking at an Axis Bank event, Shah, who heads Kotak AMC, said there is a need to "shed our limitation".

He said China recently sold USD 6-billion sovereign bonds despite sitting on USD 3 trillion in forex reserves to get long-term foreign portfolio investors into its market.

"We have USD60 billion investments from debt investors but this is nothing compared to what we can potentially get if we are part of the global debt indices," he said.

Shah also hit out at our poor marketing prowess, saying this has limited our weightings in the equity indices that it is a part of already and cited the MSCI Emerging Market Index, where our clout is diminishing in the face of an aggressive play by China, which had committed to increase its weighting to 50% from 32% now, which may see our weighting going down to 6% from 8.5%. Shah said at USD 2 trillion, our m-cap is around a third of China, and the weighting should also be similar, but which is not the case.

"We have to push our case, we have to market our case....but unfortunately, we have not done a good job to market ourselves," he said, adding if China is at 50%, we should be at least over 15%.

He wondered why a scrip like HDFC Bank is not included in the MSCI Index despite the high foreign ownership in the stock, while a Chinese bank features there.

Free Press Journal