Boosting domestic equity flows key to India’s economic self-reliance, says Navneet Munot of HDFC AMC

The government should roll out policies to boost investment in equities for providing inflation-beating returns and reduce the dependence on foreign funding to bridge the risk capital.

Wider participation in equity markets could enable more equitable wealth distribution in the society as more people can participate indirectly in the nation’s growth story.

Navneet Munot, Managing Director, HDFC Asset Management Company, stated that while the government is focussed on indigenising various aspects of the economy, the country should not overlook the importance of domestic risk capital in making the nation economically and financially self-reliant (Aatmanirbhar).

Deepening of capital market is critical for meeting the humongous amount of risk capital that is needed to meet India’s ambitious infrastructure development and growth objectives, he said while penning down thoughts on India beating China to become the most populous country.

Healthy domestic equity flows will help the Government’s asset monetisation program while ensuring that ownership remains with its own citizens, he said.

Retirement planning

Retirement planning is by far the most critical financial goal as retirement is a certainty. With medical advancement and increasing life expectancy, the number of years one lives post-retirement has increased. Since retirement is in the distant future, most people tend to put off retirement planning till it is too late, he said.

While, entrepreneurial ambitions of a young India combined with a funding boom has spelt a golden period for the start-up ecosystem, bulk of this funding has come from foreign Venture Capital firms, said Munot who heads the fund house that manages assets worth over ₹4.5 lakh crore.

Robust domestic equity flows make the equity market less susceptible to shocks from foreign capital flight. This, in turn, can encourage foreign investors to invest more in India as the stability provided by domestic flows can add another positive dimension to invest here.

It is imperative that the policy environment remains highly conducive for encouraging investment in equity as an asset class, he said.

“While we have overtaken China demographically, we still have a long way to go on other fronts. For instance, in 2021, China’s per capita income ($12,556) was six times that of India’s ($2,256). Bewilderingly enough, in 1990, India’s per capita income ($368) was higher than China’s ($318),” he said.

This divergence over the last three decades could be attributable to China’s focus on manufacturing and infrastructure. Both these aspects have been at the forefront of Indian policymakers’ agenda, said Munot.

It is often said that China is growing old before growing rich. While India, on its part, has always been culturally and spiritually rich, it is high time that in this Amritkaal, every citizen also becomes economically rich before growing old, he added.

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