Why more allocation?

The growth is here. China and India are forecasted to have the strongest growth — around 9-11 per cent over the next few years, while the regional average is slightly above 6 per cent. They are the largest economies, at $3,250 billion and $1,125 billion respectively. Elsewhere in the world, there is not much growth, a situation that does not appear likely to change. Merrill Lynch forecasts 1.4 per cent GDP growth for the US next year, 1.0 per cent for Japan and 2.3 per cent for Europe.

And it’s not “India’s Warren Buffet”, Rakesh Jhunjhunwala, alone who says India is set to achieve double-digit growth in coming years. Signals from India Inc, which is in the midst of the quarterly earnings season, also confirm this. “We judge that India could grow sustainably even faster than at present — and faster than most other studies have suggested — at 10 per cent per annum over the coming decade,” said a top official of Wall Street investment firm Lehman Brothers, who was in India last week.

The government might have its own reasons for moderating capital flows — and the PN curbs may be questionable. But nobody has any doubts about the increasing transparency and higher inflows waiting to happen in future. “Limiting the use of offshore derivatives will lead to a surge in terms of many funds/investors seeking FII status as India Inc’s growth momentum will keep inviting fresh capital,” said Manish Jain, vice president (Investment Banking), Atherstone Capital Asia.

... contd.