Implementing the reforms vision is the “principal challenge” for India, Kaye said, specifying that both the challenges and opportunities for the country are domestic in nature.
Warburg Pincus has invested USD 5 billion in India since 1995. Its bets include HDFC, Kotak Mahindra Bank and Bharti Airtel, where it made handsome returns, setting a milestone for risk capital investing.
The remarks come at a time when India has implemented reforms on the farm and labour fronts.
“India has all the powerful tailwinds of demography and so much else, but that’s not destiny, it’s not foreordained and requires continued vigilance and significant action to continue to take advantage of that opportunity,” Kaye emphasised.
Speaking at The Economic Times Global Business Summit through a video link, Kaye said India has improved remarkably since 1995 when the firm first invested in HDFC but added that the main challenge for the country is to complete the reforms vision.
“…the challenges still remain and I think those are the big open questions for India,” he said. “I think what still remains India’s principle challenge is sort of completing the reform vision.”
Kaye welcomed the policy response to the current pandemic, saying while a debate rages domestically about the same, it has been better than what he had expected even though India has “offloaded” the responsibility of revival to the banking system.
“I think the more significant way it (India) dealt with it is that it essentially offloaded responsibility in some ways into the banking system and then provided meaningful monetary support through the the RBI and moratoriums which has ended just now and we will see how it plays,” he said.
He acknowledged that the fiscal response was limited to the schemes to revive rural incomes and added that the strategy followed by India seemed to be “letting the recovery itself lead economic recovery”.
The early lockdowns helped create capacity for the healthcare system and have ensured that the system has not “toppled” even as the number of infected people rose in India.
As the advanced economies implement a debt-fuelled recovery strategy, emerging markets including India will have to be vigilant of its impact, he warned.
“…those countries that are capable of issuing debt in their own currency in relatively unlimited amounts and that will be a challenge not just for India but it will be a bigger challenge for lots of other emerging markets around the world,” he said.
Asked about the decoupling underway at the global level given the tensions between the US and China, Kaye said India has a distinct place and a role to play, but added that her challenges and opportunities are more domestic.
“I’ve always felt that the India story itself at its core is more about India itself and its challenges and opportunities are more domestic in nature,” he observed.
The firm may invest its next USD 5 billion in five years, he said, adding that one of the fundamental shifts he sees now is the entrepreneurial dreams which the young are full of, which is an opportunity for private equity investors and also represents optimism for the country.
Warburg is big on the financial services space and Kaye pointed to its bets like IDFC Capital First Bank and Avanse Financial Services.
“India is going through a fair bit of change and disruption at the moment and what comes next is unclear and uncertain… India’s fundamental challenge, I think it is all growth, how does India grow? The private equity industry has a role to play as a catalyst for that opportunity and certainly we intend to be an important part of it,” he said.