While in India, Shirley Mueller was drawn toward investing in the country, but it's a big risk that comes with a host of issues that could make investors think twice.
Save your money and get interest rates at 9%? You can, at least in India.
While there recently, I saw a minimum of nine large billboards that made this promise. They couldn’t be missed. The posters were monumental and on every major highway in and around Mumbai, plus elsewhere. They were appealing and convincing, showing happy participants. In fact, I wanted to be one of them. If I lived in India I could.
For Americans though, the advertisement is too good to be true. We are struggling to achieve just 0.5% on short-term savings, one-eighteenth what we could glean in India. This savings account rate isn’t the only reason that India looks good.
India is developing rapidly. Its gross domestic product (GDP) growth rate in the past few years has been enormous, though it is slowing. Nevertheless, compared to the U.S, the increase in growth rate is remarkably rich. The charts below tell the story. India’s percent change in GDP is above and the U.S. is below.
U.S. hedge funds took notice. One friend told me her son, who works for one, went to India to determine if his company should invest. They came back empty handed. Their conclusion was, “Maybe later, but not right now.” It is interesting that the managers of this hedge fund have skin in the game. They are heavily invested personally just like many of their participants.
The Templeton Franklin India Growth Fund (
) and others are bolder. They have already tapped into India’s apparent promise. Franklin Templeton started their fund in
. Though it is down 25% this past year, it was up 82% in 2009. Clearly, it is only for those who can stomach big risk.
Some Indians billionaires feel this way too. Though they are affluent and have excess cash, at least
of them thinks it is time to “quit India.” This is because of the country’s lack of transparency, bribery and fraud plus unnecessary red tape as well as unpredictable government changes.
It is true that I was drawn toward investing in India when I was there. I’m glad that I took another look. India reminds me of driving home on a dark night past houses that are brilliantly lit. The sight is so appealing, but you can’t see inside.