This is really the fourth wave we have seen of great foreign interest in India. My only cautionary tale is that the fourth wave has been such that India today is the most expensive stock market in the world. So it just tells you what the expectations are out of India, because when you have the most expensive market in the world, it means valuations are very high. When your valuations are very high, it means expectations are very high. So I can’t find too much wrong with the Indian economy today. I think it’s in very good shape, the macro numbers look great, demand is doing very well, profitability of companies is doing very well. But as an investor, you’re always trained a bit to think of, ‘Okay, how much is priced in, what can possibly go wrong?’ I was just mapping it in my head — fourth big wave, the most expensive market in the world. The last time we had this honour was December 2007. We just have to be a bit mindful of where we are today.
On whether we are growing slowly into a post-dollar world
So far it is all talk because if you look at the dollar itself, it is still very strong. In its 50-year history, the dollar today is at the top end of its range compared to most currencies. The post-dollar world is because, I think, America made one very key strategic mistake, which is the way they imposed sanctions on Russia last year. When you impose sanctions that way, you may be completely morally correct in doing it but when you’re weaponising the currency to do something like that, I think it leads to a lot of governments around the world thinking that if the US can throw Russia off the dollar standard, we better protect ourselves from being thrown off the dollar standard. So that, I feel, is a key strategic mistake that America has made. Its consequences will be played out over time.
On India and re-globalisation
If you look at the data, you will see that there is a very clear shift which is going on in the supply chains around the world. But India is not the only beneficiary. India is one of the beneficiaries. (There is) Vietnam, Indonesia, Mexico, in terms of being very close to what’s happening to the US, and then in Eastern Europe, (there are) countries like Poland.
We have to be careful in India of a couple of things — we are not the only country; there are options people have, markets like Indonesia, Mexico, Vietnam and others. The policy on the ground and the macro numbers look good. If you look at the FDI numbers in India, those have really fallen off quite significantly. Why is that happening? We need more FDI to come. Why is private capex in India not picking up more in the way it should be? These are some of the answers that I hope our policymakers also think about rather than take it for granted… The data on the ground today shows that yes, India is benefiting from the ‘China plus one’ strategy but it’s not just India, there are other countries too which are trying to pick up the pieces and do this… some doing it more quietly, some with more fanfare.
On whether the incremental reform mindset will change
It’s very difficult in India because even if we look at the state elections, the big risk is that we get into competitive populism. Right? Because every state is announcing more and more measures about what to do. And this is not just a budget deficit impact, it’s a cultural impact that if you put up a welfare state too prematurely, you prevent people from moving from rural areas to urban areas, which slows down the transition, and the work culture gets a bit distorted. These sound like very heartless comments to make, but if you look at China, as an example, it had no welfare state. China, in its public sector enterprises in the 1990s, fired 70 to 80 million people. You can’t have these kinds of policies in India. So you have to be mindful of what is the DNA of a country, what are the societal factors. Even now, there is a lot of statism because in India, it’s impossible to privatise anything… That’s the way India functions, which is that there is very little deliberate policy action, and things happen almost by neglect and that’s how the private sector grows.
On whether we give too much importance to foreign capital
I think there are two factors — first, in general, India has structurally got a current account deficit. So the math is that if you have a current account deficit, you need to fund 100 billion dollars a year or something. But the second point, if you look at the history of development, the single best indicator is what the domestic businessmen are doing. Very rarely have countries been successful if the domestic businessmen are bearish and the foreigners are putting money in. Usually it works the other way around, which is, I would rather invest in a country where the domestic people are more optimistic than the foreign guys. Often the foreign capital is the last one to come and catch the tail end of the boom.
The first to leave happens to be the domestic guys. In fact, the best predictor of a crisis is when domestic businessmen start taking their money out. That was my first experience in East Asia in 1997 — before foreign capital could leave, domestic business people started taking the money out, on the quiet. I’ve made this point earlier that it’s the domestic businesses that I want to see remain more in India today. It’s a great story which is going on but if I were to look around the fault lines, why are so many people moving to Dubai, Singapore? Of all the good that’s happening, one of the things which I think the government needs to be careful about is how confident are you feeling about the domestic environment and domestic businesses? Have the investigative agencies been weaponised too much where people don’t know at any point in time what can happen?
On the impact of Hindenburg report on investors
I’d say briefly, but it was very quickly absorbed and they moved on. The good thing about India is the fact that it’s an incredibly diverse market, which is not true of many emerging markets. So there was a brief impact, but it could very quickly be digested.
On India embracing digitisation
It’s a multifactor phenomenon. This idea of India having good quality companies has been there for a long period of time. A stock market culture in India has been there for a long period of time. This has been accelerated in the last few years. One of the good things that the Modi government has done has been the way it has embraced digitisation, which has led to a digital economy coming up in India. These are always very complicated narratives. We want to come up with straight correlations. I can come up with three great things which shouldn’t have been done. But I’d say that digitisation, and the way they have embraced it, has definitely propelled India and the market ahead, and is also possibly helping them electorally. Digitisation and the fact that people are getting more direct benefits is making them less angry with governments, taking some of the edge away in terms of the anger.
QUICK QUESTIONS
If you have to pick one in India: EdTech, FinTech or BioTech?
FinTech.
One advice you’d give the Prime Minister if you have 10 minutes with him in a room alone.
I don’t want that because I’ve learned the hard way that giving advice doesn’t work, no one wants to listen to you. That goes for any prime minister. But my only observation is that today when I see what’s happening in the ecosystem in India, I hope he’s getting frank, objective advice. The tendency that I notice is for everyone to go in and be a sycophant, suck up and say how things are great.
Do global investors look at sectarian tensions in India?
I’ve not heard much of it. And I have to say that it’s very disturbing when you read the headlines on what’s going on. But when we travel across India, I think the further you go from Delhi, the more optimistic you feel.
TATA, Birla, Adani, Ambani — who is the next in this list.
It’s very hard to predict. In India’s case, the big boom if India has to make it to the next level in the next five years, is on the investment side. I would be backing people who are playing the investment story in India.
Of all the emerging markets you’ve tracked, which will be the first breakout nation?
I made a forecast that the next country to join the developed market would be from Eastern Europe. So, like a Poland.
lHow many years before the US dollar loses its position as a global trade currency?
It’ll take forever because it’s very hard to do that. But it’s peaked and the seeds have been sown, and last year was probably peak dollar.
If you were the author of a book on the future of the Indian economy, what would you title the book?
My favourite line, which I’ve always said, is that this is the country that always disappoints the optimists and pessimists. We have disappointed the pessimists in the last few years, because of how well India has done. I just hope we don’t disappoint the optimists.
If you were to author a book on the future of Indian society, what would the title of the book be?
I haven’t thought about society that much. As far as India is concerned, what really strikes me is that we are truly like the United States of Europe — the amount of sub-nationalism, the federalism, that is what I find remarkable about India.
lIf you were the author of a book on the American economy, what would its title be?
That’s the title of my next book, I can give it away: ‘What went wrong with capitalism’.
Bharat Jodo Yatra: hit, miss or makes no difference.
Again, the objective facts show that his (Rahul Gandhi’s) popularity ratings have improved after that but I fundamentally believe that the next election will be Modi versus Modi. Because there is no one who’s going to be able to stand up against him.
What’s better for India, a strong majority for Modi’s third term or a Modi-led coalition?
A Modi-led coalition is something everyone privately will say to you, no one will publicly say that to you.
And what’s better for India, a Modi-led coalition, or an Opposition-led coalition?
Again, it depends on who is going to be on the other side. What we all want is a system where there are sufficient checks and balances in place.
I think, secretly, that is the desire. But having said that, I think that we keep overrating national elections, because in India, the state elections are important as well.
If the Opposition comes to power, who is the one leader you think will be good for the Indian economy?
A lot of people in this room I have spoken to tell me that the best prime minister India never had is someone like Sharad Pawar, but he is too old now it seems to be able to run a coalition government effectively.
Biden, second term, or Trump another term, what’s better for India?
I think it doesn’t matter. You know why? The US is obsessed with China, they really want India on their side. So it makes no difference.
(From right) Ruchir Sharma, Chairman of Rockefeller International and Founder of Breakout Capital, with Shyamal Majumdar, Editor,
Financial Express, and Anant Goenka, Executive Director, The Indian Express Group 
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