'India can afford more debt at this juncture.'
'India's fiscal deficit is still manageable.'
Mark Mobius, founder, Mobius Capital Partners and emerging market investment guru, was in Mumbai to address the India Commodity Day event, organised by the Multi Commodity Exchange.
After the event he spoke exclusively to Rajesh Bhayani.
Moody's has downgraded the outlook for India. How do you evaluate that?
This is an unwarranted move, not expected.
Things are not that bad in India.
However, as they have changed the outlook, there will be some impact on the market.
The Indian economy has been going through a severe slowdown. How and when can it recover?
India should spend more on infrastructure.
This could be a single, major, move that can revive growth in the economy.
India did lower corporation-tax rates significantly which is a smart move and will make India competitive, but infrastructure spending is the need of the hour and should be prioritised.
The country needs more roads, airports, bridges, and so on.
I would also say states should have more to spend.
When do you see the Indian economy recovering?
I think from next year India will start recovering when Prime Minister Narendra Modi's programmes start showing results.
Modi is concerned about the economy, which is why he is taking actions, including cutting taxes and providing support to ailing sectors.
Globally central banks keep changing their stance in terms of easing liquidity, which they were tightening earlier. When does one see stability in their policies?
Central banks look at 2% growth, and they feel 2% inflation is needed, but that leads to printing money.
However, growth comes with productivity improvement, which central banks seem to be ignoring.
So they keep on printing money without seeing the results.
That is why gold has gone up because investors see the value of paper money going down.
Where do you see gold going as central banks globally continue printing money?
Since there is no end in sight for central banks printing money, I see gold prices doubling from the current level in 10 years.
I recommend at least 10% of gold holding in portfolios as of now.
If one looks at silver, it will also go up in line with gold prices, but I still recommend buying gold.
Where do you see bubbles building up in financial markets?
People are rushing for good-quality stocks as the markets continue rising.
If one studies price-earning (PE) ratios, when interest rates are low, PE ratios are higher.
There is that way a direct relation.
At present valuations look high because whenever interest rates start going up, it will be difficult to sustain high PE ratios.
However, I don't see a big correction in the markets.
India is talking of raising sovereign bonds. How do you see that -- opportunity or risk?
The sovereign bond market in China is much bigger and in that context one should see where India is.
As interest rates are low, it's an opportunity for India to raise money through sovereign bonds.
India can afford more debt at this juncture.
India's fiscal deficit is still manageable.
What is your bet on India?
In our portfolio, India's share is 18%, larger than China's.