Reforms focus, corporate topline will keep India growth story intact
Sonjoy Chatterjee, Goldman Sachs
30h Jun 2016 |Source: Economic Times
- On reforms: In the corporate sector, it's visible through the winners, who are the survivors, versus those who are struggling to make the cut in this revised business paradigm shift. It is unfolding as we speak and a great deal more will take place in the next few years. The shift is visible across the whole spectrum of financial sector reform, such as the bankruptcy law and the push by the RBI governor to tackle the bad loan issue head on--basically the decision to call a spade a spade. These reforms are linked to the same overall governance shift that is being driven by the Prime Minister and the finance minister. This period of change will no doubt be marked by some amount of challenge, any transition always is... but in the end, the banks will ride this through and our financial and corporate sectors will come out much stronger and in a better place than we are in now. The shift will set the theme for a very robust growth trajectory for our country.
- View Rajan's departure: his departure announcement has created some uncertainty around the policy stance on liquidity and interest rates, asset quality and lending structure. At the end of the day though, overall impact will be limited as India's current macroeconomic fundamentals stand better than most of the emerging markets. The growth story will continue to remain intact with the government's unwavering focus on reforms and improvement in the top line of corporates suggesting a better operating environment.
- Overall, as a firm, do you remain very bullish on India? Across our businesses, whether it is corporate finance (mergers and acquisitions and equity capital markets), equities brokerage and our principal investing arms -which include Goldman Sachs's merchant banking division, special situations and principal strategic investments group, who invest in fintech startups -weare very, very active. Of all the Asian countries, India is one of the markets where we have and continue to be most active, when it comes to investing. As a whole we have invested approximately $2.5 billion of capital in India since 2008.
- As an investor in Indian equities, we also continue to be very active through our global funds. Our India-specific investing fund in equities has an approximate AUM (assets under management) of $1.7 billion. About two years ago, it used to hover around $200 million. That is again a function of how much India has changed in the eyes of global investors who ask us to manage their capital.
- Implications of Brexit for India? As a region and specific to India, the fundamental linkage between Asia and the UK or Europe is moderate. While these linkages are moderate, our equity strategists believe there could be short-term market impact from negative sentiment and risk aversion. We could also likely see a generally negative impact from FX. That having been said, Brexit is a historic event, but not a systemic one.