India will be the No. 1 place in the world for FDI: Prem Watsa
Watsa says Fairfax Financial would double its investments in the country in the next five years.
Your thoughts on the Narendra Modi-led government winning a second term…
I see this as a massive transformation in India because of economic freedom. It does not matter which class you come from. It doesn’t make a difference what your caste is, whether you are high-class or low-class, or what your religion is, because there is economic opportunity for all. Caste, religion, all will be broken in the next five years as every Indian, as Mr Modi says, will get an inclusive opportunity at economic growth. That is the most exciting thing that I think of India. From an investor’s standpoint, India will be the number one place in the world for foreign direct investment. Money will flow into India, believe me, in the next five years. I am very, very optimistic about India’s growth prospects.
How big is the Indian opportunity for global investors?
I see money coming in from all over the world — the US, Canada and Japan — because India is a big democracy. More than 600 million people voted in this election. People understand democracy, the rule of law. And you have had it for five years. You will have more of it. There will be more privatisation, more business-friendly policies. And fundamentally, as I travel all around the world and talk to more people, I have realised that is what creates jobs. So, you have economic freedom and that’s what will help India.
Which sectors do you see this money flowing into?
We have been investing in financial services sector a lot. We like insurance, we like banks. We have invested in Catholic Syrian Bank, a Kerala-based bank, and it is going to expand outside of Kerala. Financial services grow at 2-3 times the economic growth of a country. I see India’s economic growth in the next five years to rise from 7-8% to 10%, perhaps even more than that over time, because that is the potential of India. We have invested in the Bangalore International Airport. We have the grain storage company NCMS (National Collateral Management Services). There is IIFL, a non-bank financial institution. We have diversified investments such as through Thomas Cook in India, investment in Quess Corp. So together we have in India approximately 5 billion dollars of investments and 3,00,000 people working with us.
I think over the years, we will be putting a lot more money into India. I consider for us — and many people will follow —India is the number one emerging market. For investors all over the world, the opportunity in India will be really significant as Mr Modi rolls out his plans for the next five years.
Does India stand to gain from the US-China trade war?
Given all of that, it makes India more business friendly and money will flow into India. And I am sure Mr Modi is planning to do that. There is probably some of that taking place (money flowing into India as the trade war escalates). I believe the US and China at the end of the day will get their differences solved and so I think China is too big a nut to solve and I think it’s one for the US and one for China. I think they will figure it out and I don’t know when as it might take a little, give a little and get the deal done.
President Trump just tweeted this morning that with India, the historic partnership between India and the US is very valuable to the United States. So, the Indian diaspora would want to send all of the profits to India, and this will direct more money into India and it is as simple as that. And the economy is much smaller than that of China as it is just $3 trillion. And there is no reason why the Indian economy won’t do as well and perhaps do even better than the Chinese economy in the next five years.
What is your take on measures such as demonetisation and GST?
Whenever you are implementing something like demonetisation and GST, it will never be perfect. It can never be perfect. For something like GST, most people thought it could not be implemented but it has been implemented. It is one tax rate for all the states. That is phenomenal to be able to get that because they had to go through the Lok Sabha, they had to get it through the upper house i.e. Rajya Sabha and they have been able to do it and get that through. They first got the support from everyone and now they will tweak it too to ensure it works well. Apart from a simple tax regime, it also reduces corruption. And demonetisation also had a similar intent. The bigger point there was that, listen, we are not going to tolerate corruption and now you have had the after-effects of that where more and more people are now using digital payments in India. So it is a trade-off between cash and corruption. So, all of these actions are very good for India.