Billionaire Buffett explains why he has not invested in India

15:41, May 24, 2010      

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Earlier this month, at a Berkshire Hathaway shareholder meeting, a 12-year-old Indian girl asked Warren Buffett why he has not invested in India despite the fact that India has 17 percent of the world's population, average annual economic growth of 7 percent to 8 percent, and with such speed, the Indian economy will overtake the United States in 2043.

Buffett has investments all over the world, but he has not entered India, although he has subsidiary operations in India. But he has never conducted mergers and acquisitions there on the same scale as has done in China.

His explanation was that he had never ruled out investing in India, but India has some bureaucracy, and also India has limitations on foreign capital investment in the insurance industry, making Berkshire's investment complicated. In response to another question later, Buffett said if China were compared with India, China's investment environment is better.

Buffett predicted that, "20 years later the Chinese and Indians will live life better than today's." Buffett's old partner, Berkshire Hathaway Vice Chairman Charles Munger admitted that China's economy grew more rapidly. The Chinese government is taking more effective measures, while the government of India has led to economic stagnation.

From the words of these two Investment masters, we can see that international investors favor China's investment environment more.

In fact, this is precisely the advantage of China's development. In 2009, during the international financial crisis, global foreign direct investment inflows fell by 39 percent. In developed economies, it declined by 41 percent, and in developing economies it dropped by 35 percent, while in China it only edged down 2.6 percent. From August 2009, China's use of foreign capital inflows has maintained continual growth.

China's economic development and investment environment are better than India, but this does not mean that India has no advantage. For example, although India's decision-making system is slower than China's, its decision-making process looks after the interests of relatively more parties.

Moreover, the economic transformation of the Indian economy is emerging. Before the outbreak of the financial crisis, India had achieved GDP growth of over 9 percent for four consecutive years for the first time since independence in 1947. And in this financial crisis, India's performance has also been impressive.

Not long ago, Assistant Secretary-General of the United Nations Development Ajay Chibber said that in the past, people have always thought that it is hard to imagine that India's economy could surpass China, but recently, people are beginning to change their minds. In the latest move, Buffett has decided to visit India in March next year and intends to acquire equity in an insurance company there.

By People's Daily Online


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