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India now flavour of the world: George Soros
Moneycontrol.com | December 20, 2006
Chairman of Soros Fund Management George Soros believes that India is currently the flavour of the world and it has become important politically. According to him, India's growth rate has improved on per capita basis.
In comparison to China, Soros prefers India and informs that they have invested more in India. However, he clarifies that they have not invested $1 billion in India, as has been reported.
He feels China has the danger of a financial crisis due to non-democracy. He also adds that India earlier suffered from government intervention in policy.
He fmentions that they have fairly large positions in some real estate, financial services and infrastructure sectors.
Excerpts of CNBC-TV18's exclusive interview with George Soros:
You said that India to you seems a fundamentally stronger investment story than China. Is that correct?
That is right because India is a democracy and China is not. A growth in particular financial markets don't grow to heaven, they usually have serious corrections. When you don't have a good political system, if you have a financial crisis, it is liable to turn into a political crisis. That's what happened for instance in Indonesia, after 15-20 years of very high growth, eventually other financial crisis turned into a political crisis. That is the danger in China because it's not a democratic country.
Do you have anything specific that you have noticed as danger signals in China that prompts you to say that or is it a more general inference from a democratic versus non-democratic society?
I think there is no immediate danger of any kind of a political upheaval in China. But the rulers are very nervous about colour revolutions, maybe unduly nervous. This is a very bad development because as a result, they have stopped the political opening, they are cracking down on media freedom, on civil society. This actually increases the danger eventually of a political crisis.
Do your investments reflect this bias within your thinking that India is stronger, are you more invested in India than in China?
From market folklore, we understand that you could be about a billion dollar invested in India. Is that a correct estimate?
No, its not.
It's not that much?
No, it's not that much.
In what kind of asset classes would you be distributed in India?
I don't do it myself; I have got a team that is doing it. But they are heavily invested, actually they want shares in your television company, which is a full disclosure, I think it should be mentioned. They have fairly large positions in individual companies, some in real estate, in infrastructure and in financial services.
Do you think infrastructure, financial services, real estate will be high growth sectors?
Well that's what they think and I leave it to them, I leave it to the experts.
Are there any chances of increasing that exposure?
We might, yes.
I want to spend some time talking about India's democracy premium, as you would argue. But some people would say that it is also a democracy drag because decision making in India seems to take forever. You look at any sector, you look at telecom we still don't have a cohesive policy, you look at banking we are still going back and forth and how much foreign investment should be permitted. Some would even argue that nationalist arguments are used to masquerade what are really protectionist economic policies?
I am sure that is right but it is always a question of the changes at the margin. If I look at it from the outside what conditions were 12 years ago and what they are today, there has definitely been an improvement, an opening up, a reducing of the licensing requirements and so on.
I did invest in India 12 years ago actually and it was not successful. We did rather poorly in our investments; I think we were a little too early. For instance, we were going to build a power plant and there was a take or pay contract and the provisional government was changed and the contract disappeared and all the money we invested in planning the power plant was lost. So we were not successful at that time exactly because of state interference.
But those kind of conditions have certainly gone down but as I said, policy consistencies isn't a hallmark that we can be proud of. We can be proud of a lot other things but consistencies of policies are something that we can't be?
That's correct and that's why there is still room for improvement.
But do you still believe that this is a story that you think is one of the top most stories in the world today?
It is, this is one of the more attractive markets.
What about the duality of India again you haven't spend too much time, say when you must have driven from the airport or when you just go around the city. You do see that this country is a country of huge dualities. There is a lot of poverty, there is a lot of chaos and on the other side we have got edifices of economic growth. Does that worry you?
Yes, that is I think the major problem for India to solve. Now you have got growth, you have got growth per capita. But how is it distributed? This is exactly because you are a democracy, you have to pay attention to that and have a positive, if you like affirmative policy towards the underserved. For instance, I am very interested in the
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