'Getting into global debt can fetch us $100 bn'

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 the 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 a 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 percent from 32 percent now, which may see our weighting going down to 6 percent from 8.5 percent.

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 percent, we should be at least over 15 percent.

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.

He said, "we have to thank the Trump administration", explaining that because of the US interventions, the MSCI has now called out China to reform on a few measures before increasing its weighting to 50 percent.

Had it not been for the US, Shah said, "China effectively would have converted the MSCI Emerging Market Index into MSCI China and other markets indices."

"What we need to focus on is increasing our weighting in the benchmarks. This will help us get fair and higher allocations from investors and also long-term money," he said.

Speaking at the same event, Aditya Birla Sun Life AMC chief executive A Balasubramanian said the asset management industry is staring at defaults worth Rs 2,500 crore from doubtful assets of over Rs 8,500 crore.

Balasubramanian also said money has indeed moved out of debt funds because of safety reasons, but cited the performance of one of his funds, which has delivered returns of over 8.3 percent per annum over a 25-year period, to illustrate that the fixed income instruments will continue to be attractive for investors.