The US and India just managed a diplomatic and trade breakthrough. Do you think this marks the end of a difficult phase in the relationship?
I’m really not focused on any one trade agreement, but I do believe over time, our two countries have to be closer. That doesn’t mean we don’t have volatility in that relationship, like every other relationship, but over a long horizon, I think the two countries need to find a pathway to which we can be growing together. We have a lot of similarities, we have a lot of differences.
Yet, I think the similarities outweigh the differences, and the opportunities we have as two countries together to build prosperity in the world are unique. This is a place where democracy thrives. There’s just enormous opportunities to be working together in a fair and equitable way.
India is going to be a place that is going to have great needs for the importation of capital to fulfil the opportunities. We believe it will be a good destination for capital. So we look at this as a large opportunity.
That being said, I think one of the most important things for India is the build-out of its own domestic capital markets. The Indian economy is one of the fastest growing in the world, and too few Indians are investing with India. Most Indians have so much money in their bank accounts, some of them are investing in maybe bonds, but you’re a rentier when you do that. It’s safe. You’re collecting a coupon. You get your maturity, you get your payments back. But you’re not growing with your economy. And when you think about the Indian economy, it has the opportunity to grow at 6-10% over the next 10 years. Why would you not want to grow with the Indian economy? And so the need to expand its capital markets, in my mind, is urgently necessary.
The trade agreement between the US and India, the trade agreement between the Eurozone and India, are just a component of my optimism for India in the future.
A lot of Indian households have their savings in real estate, gold and fixed income. So your point is that to actually participate in the economy and to be investing in the economy, you need to be in equities?
Real estate is a little more localised, but you’re growing with the Indian economy. But if you want to be a part of the entire growth of India, investing in the Indian equity markets over time is probably the best solution. Gold has proven to be a great international investment, and it is somewhat of a diversifier. But you’re not growing with India. You’re just growing with basically the fears of the world. Right now, gold has rallied dramatically because of all the fears, the debasement of currencies. So I’m not by any means suggesting gold is a bad investment. But gold has a different parameter over the long run. Gold is independent of India. In fact, when you invest in gold, you actually hurt the Indian economy, because once you invest in gold, there’s no monetary effect to it. It’s an asset that is unaffected to the economy. So when you invest in gold, you’re actually taking money out of the economy.
After gold’s recent performance, we’ve all been saying that the Indian grandmother’s wisdom of investing in gold has delivered better returns than all professional investment advice.
In the short run, that’s true. The question is, let’s say gold is at ₹5,000. Do you think gold could be at ₹10,000 or ₹15,000? I’m pretty confident that Indian equity market over the next 20 years is going to double and triple and quadruple. I don’t see gold moving that way. Gold obviously moved from ₹2000 to ₹5,000, and so, at this moment of time, we can all relish what gold has done. But, you know, to me, the long-term opportunities to invest alongside the growth of India appears as a much better long-term value investment than gold at this time. But you know what… I don’t want to dispel grandmother’s wisdom. Can’t compete with that!
Foreign capital inflows into India have been anaemic recently. Is this just a function of the higher valuations Indian equities are seeing in relation to emerging markets? Do you have any recommendations about what India could do to improve these capital flows?
Well, trade agreements are a foundation probably for more inflows. You saw the rupee rally quite a bit since that. There was some fear about where India was going. The rupee devalued 12% or so over time but it’s now rebounded quite considerably. Right now at BlackRock, we are looking for investment opportunities here. We’re looking to invest side by side with partners. We believe there are tremendous opportunities to invest for the long run. And we have investors from Southeast Asia, from the Middle East, from Europe, who are interested in investing in India.
Historically, India has had quite a bit of currency controls. So, with the opening of the economy and with less currency controls, I believe the opportunity is for more importation of capital. We will play a role in it at Blackrock, to identify great opportunities.
But, the real question is, why can’t we develop domestic capital markets quicker so foreign outflows or inflows are less impactful on the economy, less impactful on the rupee and so the key is not, can we get more foreign capital? Foreign capital, to me, is additive to the foundation of domestic capital. Economies that are so dependent on foreign inflows are weaker economies. And so the key message is—help India build a resilient liquid capital market.
Reliance and BlackRock are both companies known for scale. Your franchise here has seen steady growth, but perhaps measured. What are your plans for the business?
We’re very optimistic in our position over the long run. Our key is making sure we could give more and more Indians confidence and hope that they can invest in the global capital markets and, specifically, the Indian capital markets, in a way that will meet their long-term needs and aspirations. I believe the scale of Jio, its relationships with so many Indians worldwide, with the technology that we’re building together to provide a simple, easy app to help people understand the opportunity is really something that’s going to be quite important. We’re very ambitious about the opportunities we have.
The Indian mutual fund industry is mostly based on an advisory-led, indirect model. BlackRock is about technology, scale and it’s about direct. So how are you going to meet this challenge?
It’s through better applications… Better information, better technology over time, I think will win. It generally wins in almost every other country and almost every other industry by providing smart, systematic approaches to investing, without the frills. We’re not here to talk about the velocity of money. So much is about the market going up or down. Honestly, whatever happens in the market today or this week or this month, doesn’t matter. It’s about, do you believe in the opportunities of growing with your country? And if we could, through technology and our relationships, can we build that opportunity going direct? That will be key.
But worldwide, BlackRock has been a real ally to even all the financial advisers. We’ve created models and created technology to assist each financial adviser to help them navigate their clients’ portfolios too. So it’s a combination of going direct, but also working with financial advisers.
Are you satisfied with the progress that your business has made here in the last few years you’ve had this partnership? Or do you feel a sense of impatience?
I believe we’re just at the beginning, and I believe we’ll have that J curve. When I think about BlackRock now–next month will be our 38th year as a firm–we have never grown, I would say, metamorphically. We have grown steadily every year. We just build and build and build and build. We’ve done some inorganic transactions, but it’s just still building. It’s a long journey. It’s not about one year or two years, it’s over five, 10, 20 years. It means you have to consistently be there. You have to consistently be working with people, and over time, if you do your job with consistency, with integrity, and you are a client-centric organisation… over time, we’ll fulfil those opportunities.
You’ll have a new Federal Reserve chairman soon. President Trump wants lower rates. Kevin Warsh is seen to be an inflation hawk. How should market participants and countries prepare for the new Fed chair?
It really doesn’t matter. No leader in the world can dictate to markets over the long run. Yes, in the short run, policies can dictate it. But even if the Federal Reserve eases and if the market believes there’s still embedded inflation, the yield curve will steepen. The Federal Reserve cannot control the 10-year treasury. And so, yeah, we can have very low short rates, but we have a very high 10-year rate. The markets tell the truth over the long run, and it doesn’t matter who’s politically trying to shape that. And I do believe, under Kevin Warsh, the Federal Reserve will remain independent.
That being said, presidents can always choose an economist who they believe fits their own personal needs and wishes. That’s been true forever. That doesn’t mean once you’re in the office, you may have viewpoints that are wedded to some economic theories, but ultimately, over the long run, the markets don’t lie.
And if, in the US, specifically, because we’re so dependent on importation of capital—30-odd percent of the US credit markets is owned by foreigners—if foreigners believe that we’re debasing the currency by lowering interest rates, you’re going to start seeing the dollar deteriorate, and you’re going to see the 10-year treasury widen more. And so I don’t pay attention to that noise. I know it’s great fodder for newspapers, but it really doesn’t matter. As I said, 50-odd percent of BlackRock assets are retirement, so none of that matters. Our job is to focus on making people think about the long journey over a long horizon.
There are concerns over concentration in the top few AI stocks in the US, and a lot of circular investments happening there that could be a bubble. Where do you stand on this?
There is no AI bubble. My biggest worry is not that. My biggest worry is we don’t continue to invest and invest and invest in technology and AI and China wins.
That doesn’t mean they’re not going to be some big failures. Capitalism means we’re all growing and some fail. When we talk to all the major hyperscalers right now, they’re out of compute, the amount of demand they have for cloud, and now it’s just the beginning of the J curve for AI. I don’t see that bubble by any imagination.
That being said, we’re going to have a few companies that maybe are going to have $10 trillion market caps. That’s pretty daunting. What does that mean for society? Big questions. I don’t know.
If I look at every industry, this is going to be one of the big social issues that every country is going to be facing. Every economy, every industry will have K economies—you have big winners and some losers. Scale is more urgently important than ever before in every industry.
Do you have a big global capability centre in India?
We have over 5,000 employees here. One-fifth of our headcount is here in India. There’s only two other places that have more population: the UK and the US. So India is our third-largest population at BlackRock.
Under President Trump, there is a feeling that the US has become a bit fickle, a bit unpredictable. Do you worry that countries will start thinking of the US as not a reliable long-term partner?
Look, there’s change. No one wants to change. If you think about the economic rationale 80 years ago, in terms of what the US did to help countries rebuild themselves post the two World Wars, there was a great need to help these countries grow and rebuild. So much of US foreign policy was based on how we will create asymmetric trading treaties to allow you to grow. Most of these countries have grown fantastically. Do you believe that the purpose of those treaties 80 years ago—are they relevant today? I would raise a question that in many cases, those treaties are not as necessary today. And so yes, there is, there’s uncertainty, there’s sometimes anger.
And yet, when I have conversations with European leaders privately, they agree with President Trump that for Europe and its future, they need to be a little more independent, less dependent on the US.
That being said, NATO still is very dependent on the US … We had a treaty 80 years ago called NATO, and then everybody was agreed to have contributed 3% of GDP. None of them did. So okay, now they’re doing it. Some of them are doing as much as five. I don’t think that’s a bad outcome. And by the way, privately, most of the Europeans would say it’s not a bad outcome. We were living off the backs of the US. And so I think we’re going to look back in two or three years and say we’re able to adapt in the world. So all this uncertainty, all this noise, all this emotion… things are fine, and that’s my message to everybody. We’re all going to grow. We’re all going to adapt, hopefully we get better from it. But the key that every democracy needs to be focusing on, are we broadening economic growth, or is economic growth narrowing? And that’s the fundamental problem that’s facing so many democracies.
You’ve been coming to India a long time. What has it felt like to watch this country change?
Well, I actually believe, India has begun to differentiate itself only in the last five to seven years in a major, consequential way. I believe India doesn’t understand how forward thinking it is, in relation to its digitisation of the rupee. I’m very worried about some of the developed countries. Are they moving fast enough in the digitisation of currency? I believe India is at the forefront of so many related things because of its digitisation.
I look at India as a place where I have to learn to grow. Because it is one of those novel places that are becoming leaders in the infrastructure of finance. I believe the infrastructure of finance is going to be evolving very rapidly through tokenisation. We’re going to be tokenising every financial asset. I think every country should move much more rapidly towards the digitisation of currency, like Brazil and India have done. So I look at India as a place to see cutting-edge changes going on.
Now it has created a national power grid. Think about the role of what 5G has done for communications in India. We’re going to more rapidly create different forms of power, whether it’s fusion or green hydrogen, and all these things. And now India is building solar panels here. No, they’re not buying Chinese solar panels. They’re building them here. So the opportunity could we see, in 10 years, India becoming energy independent? What will that do?
Are there parts of the global economy that are of concern to you, either in terms of an asset bubble…
The biggest risk is, are we moving society fast enough to prepare for the AI revolution. There is no question AI is going to change things. A lot of jobs, a lot of white-collar jobs are going to be modified or lost. The need to build out AI requires massive infrastructure so there are a lot of blue-collar jobs that are going to be created from that. Is society prepared to navigate and modulate that? The changes of technology are moving faster than, I think, the cultural impact. And I think this polarisation of fears, polarisation of ideas… And so the key is talking about it and getting more countries, more people prepared.
How do you look back at your first year as co-chair of the World Economic Forum? And have you yet invited Prime Minister Modi to come to Davos next year?
I would say in the first year we have built a platform of success. We have a lot more to do. I look forward to making sure that WEF becomes a destination to have real conversation, real debates and form a deeper understanding. We had over 800 chairmen and CEOs of companies. The biggest ever. We had 78 or so heads of state—also bigger than ever. And yes, I would love to have Prime Minister Modi come to Davos next year and to be able to share the stage with him.
