“India will continue to grow in the long-term, but there is a lot of confusion w.r.t taxation,” Mark Mobius, founder of Mobius Capital Partners LLP said in an interview to CNBC-TV18.
That is why, when it comes to India, he feels the most worried about taxation.
In Budget 2019, the government imposed additional surcharge on super-rich including FPI trusts, which had repercussion on FII flow since July. More than Rs 31,000-crore worth of withdrawal of money from equities by FIIs in July-August.
To improve sentiment at FII desk and among Indian investors, Finance Minister Nirmala Sitharaman, on August 23, withdrew additional surcharge on long term and short term gains made by FIIs and domestic investors.
FM also announced a slew of measures for various sectors like auto, MSME etc to get economy back on track. The domestic GDP growth fell more than a six-year low of 5 percent in the quarter ended June 2019 against 8 percent in same period in 2018, confirming fears of a slowdown.
The Reserve Bank of India (RBI) also reduced its full year (FY20) growth forecast to 6.9 percent from 7 percent earlier, citing slowdown in domestic businesses including auto and global recession fears amid unsolved US-China trade tensions.
“The rolling back surcharge levied on FPIs was a very good move, but he believes India’s growth can be corrected in a year or two as internet revolution is hitting every country including India,” Mobius said.
Mobius feels this is a good time to invest in India with a long-term view and India is right at the top on his investment list.
“India’s slowdown is because of internal and external factors. 50 percent of India’s problems are because of indigenous problems. We will look for lower taxes in India and bringing in foreign investors in infrastructure will be key,” the emerging markets fund manager said.
He is happy to see India focussing on water resources and preservation. It started after there had been reports that the India’s potable water capacity might go down gradually in coming years. Hence, the government started focussing on maintaining and increasing water resources.
Mobius said the PSU bank merger announced by FM on August 30 would make a big difference and regulations would be easier.
“I hope the government will look at privatising PSUs. Modi’s programs on digitisation are good moves,” he said.
The government decided to reduce the number of public sector banks to 12 from 27 earlier and, as a result, it announced the merger of 10 banks into four on August 30, the move to strengthen banks and improve productivity.
ESG investing, a well-known concept outside India (Europe, US, Canada, Australia and Japan), has been gaining traction in the country as since 2018. Many fund houses started launching ESG funds – environmental, social and governance-focussed funds.
ESG refers to the three central factors in measuring the sustainability and the ethical impact of an investment in a company or business. These criteria help determine the future financial performance of companies better.
“MSCI, the index maker, is now tracking and ranking ESG funds. There is opportunity for passive funds to invest in ESG Funds, but many people fear investing in ESG companies as they may underperform,” Mark Mobius said.
According to him, one needs to do more research before investing in ESG companies and cannot have common standards for ESG investing.
“We are quite pleased with many Indian companies getting up to ESG standards and seeing more & more Indian companies getting aware of ESG, but new generation is more worried about ESG,” he added.
After recent corporate governance issue, debt payment defaults, mismanagement of funds in many companies, the government started tightening and simplifying rules with the help of regulators like RBI, SEBI etc.