By Ritu Jha-
Top bankers took a deep dive into financial market opportunities in the US-India ecosystem at an event hosted by the Institute of Chartered Accountants of India (ICAI) San Francisco chapter. The event was attended by entrepreneurs, venture capitalists and chartered accountants held May 8 in Milpitas, California.
Speakers from ICICI Bank and SBI (California) at the panel “Financial Market US Opportunities in the US-India Ecosystem” said it’s India time to be in the global space, India’s young populace will drive India’s macro growth and also whichever government comes into play in the US or India, the integration between the two countries is only going to increase. However, they also stated that coherent and uniform policies are a must and India needs to learn from the mistakes of other countries and ensure that development continues over some time, and the policy or regulatory frameworks are in place to support continuous growth.
“The relationship between India and the US is at a unique juncture,” Vish Arunachalam, founder, chairman, and director of ICAI San Francisco chapter told indica. “We are witnessing increased trade and investment among trusted partners and strategic allies.”
Akshay Chaturvedi, Country Head, USA ICICI, elaborated on opportunities available for the people in the Bay Area. Chaturvedi split these opportunities into different areas, which is common for anybody in the US. “The first thing is that there is greater integration happening between India and the US. Whichever government comes in the US or India, I think the integration between the two countries is only going to increase, which means the corridor is going to benefit as there will be a greater amount of goods and services which are going to be exported and imported. The second thing is that there is a lot of integration happening in equity and bond markets. The bond index inflows are going to be an exchange of $25 billion. Just because we got into the JP Morgan emerging market bond index, there is also a good possibility that in nine months we will get into the Bloomberg aggregate global bond index, which means another $25 billion of inflow into the country. From an equity market perspective, I think there is more. We went around today meeting around five or six investors in the Bay Area, and people are clearly very bullish on India. And most of these are India promoted or funds which are held by Indians.”
Chaturvedi added: “Another important thing which is happening is China is getting less and less attractive. In India, the number of companies that are listed are humongous which highlights the diversification of industries that are available in the country. If you go to Vietnam, Indonesia or Malaysia, there are very limited number of companies and industries. Taiwan is very focused on semiconductors and electronic manufacturing. But India has manufacturing, automobiles, tourism, hotels, and listed online companies.”
“India has a mix of both size and diversification, which is why we are the only true alternative to China. And things are not going well in China. It’s exactly the opposite of what’s happening in India. India today is like what China was in 2000. China, over the next 20 years, grew phenomenally. Its GDP multiplied per capita. People do pray and hope that something similar is going to happen to India. The equity and bond markets are looking attractive, especially since the investors’ community, people who are running businesses in the US are establishing joint ventures in Indian companies, and opening up their own centers in India, those are the things that are quite very attractive.”
Taking the discussion forward Balachander said, “There was an expectation that the federal government would cut interest rates in June. The expectations ran high when strong data came. When you get strong economic data, instead of feeling happy about it, people in the markets feel sad that the rate cut will not come and that becomes a risk factor. If rates are going to remain at 5.5%, for a year, a lot of consumers and businesses which have taken credit at really low interest rates will come up for refinancing at much higher rates. After COVID-19 people are working more from their homes. This has impacted the capacities that have been built up in the commercial sector in the US and resulted in a lot of vacancies. I think the commercial real estate sector, maybe if the prices crash, can be another risk factor that is worth taking into consideration.”
Arunachalam added that India is a global bright spot, a powerhouse of growth and innovation. ICAI, with its network presence in 81 cities across 50 countries, has played a vital supporting role in this journey, serving as a trusted partner in nation-building.
“As trusted partners in nation building, we are in a unique position to act as the bridge between the players on both sides. So, we’re thrilled to host a power-packed panel on this important topic with two accomplished individuals from two reputed Indian Banks. CA Prasanna Balachander, Head of Treasury at ICICI Bank, who has traveled from Mumbai, India, to and Kaustabh Raut, VP Treasury from SBI California,” Arunachalam told indica.
Balachander responding to the question by Nilesh Shah, Joint Secretary, ICAI San Francisco Chapter, about macro view of India and the US said that India is at the right place at the right time now. From a growth perspective, we do think that there are a lot of long-term structural factors that will favor India as we go ahead. Macro factors like growth, inflation, external accounts, and central bank reserves seem to be very strong.
India has a growth in the region of 7% to 8% and inflation of less than 5%. “And, we have an external sector where our payment is very comfortable. It’s been a long time since we had this combination of all the three or four macro factors favoring India. And that is one of the reasons I felt that it’s a very good time for India to be in the global space.
“I think the India story is very strong from a market perspective. If we look beyond markets, we find that the Indian economy is on a much stronger footing and the relationship with the global economy will improve. The country’s growth is also going to be pretty good as we go forward,” Balachander said.
Raut said India’s young populace will drive India’s macro growth. Going back ten years, India did not feature in the top ten in terms of GDP. ‘Today we are among the top five,” Raut said. “Going by the rate we are growing, by 2027-28 we will overtake Germany and Japan, and we will be in the top three. From the macroeconomic perspective, we are poised to grow at a phenomenal pace. India’s growth will be driven by the population demography that we have, 65% of that population is below 35 years of age and 50% below 25 years,” Raut said. “We have a very young working-class population which will be a major factor propelling our growth.”
When Shah spoke about the key risks while engaging with the economies of the US and India, Balachander pointed to cybersecurity. “So as far as challenges are concerned, right now the concern is the digital economy and cybersecurity threats. Secondly, we have had regulations or reforms over the last decade, which have been FDI-affirmative and investment climate. We need to continue to be in the same frame, there have to be coherent and uniform policies. The problem with China right now is the lack of transparency. India needs to learn from the mistakes of other countries and ensure that development continues over a period of time, and the policy or regulatory frameworks are in place to support the continuous growth of investment and the overall economic climate of the country.”
Raut pointed out some other risks. “I think the other risk India faces is the flip side of the demographic profile. While the demographic profile means that there are more people in the workforce, it also means that more people earning, and consuming. That is why India is considered one of the top economies. The flip side of the argument is that social unrest could be triggered if people in the workforce don’t find jobs. That will then become a huge risk factor. The one interesting thing is that the Indian government is already working on this particular issue. They have set up a cell which is separately monitoring which countries are encouraging immigration to provide job opportunities to those seeking employment,” Raut said.
“I think that the number one risk factor is the lack of jobs. And if the jobs don’t happen, then I think that’s the real risk factor that India faces,” he added.
From the US perspective, Raut said, the risk factor would be demographic, but this time the factor is an aging population. The secondary factor is the fiscal deficit that has to be managed. “The US has unlimited power to print currency, but that power is also a big responsibility. If it wants to continue as the leader of developed countries, it should ensure that it uses this power responsibly. The third risk factor is that the US also faces risks from the inflation front. Though the US had an elevated interest rate for one year, the inflation has not decreased significantly. Another risk that it faces is a large number of personal consumption-related expenditures. These factors may lead to a lot of debt-related issues that over some time can snowball into a major economic crisis.”
