Measures taken by the Indian government to open up the country to foreign investment could see it match Chinese growth rates, Goldman Sachs’ Chairman Jim O’Neill told CNBC Wednesday.
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“I am particularly excited about the Indians. They are showing signs of really undertaking some initiative. In particular the approval by Congress of the FDI (foreign direct investment) restrictions being lifted on foreign ownership of retailers.
“It’s a huge development and highly controversial. It has had such an undeveloped commercial approach to retailing and agriculture that (it) could be a massive thing. India could get to Chinese style growth rates," O’Neill said.
He added that despite the phenomenal growth rates seen in the BRIC countries of Brazil, Russia, India and China over the past decade, future growth would be more muted.
“I start from the premise that nothing can stay as good as it is has been, forever, it can’t pan out as well as it has for the BRICs for the past decade.
But with that caveat it will be different within them still. China is deliberately trying to engineer slower growth, (at a ) healthier rate, so the average BRIC growth rate is going to be lower,” O’Neill added.
However, he said that the BRIC story would still be significant for investors.
“In terms of the collective growth of the world, the BRICs is the thing. That’s the core structural investment thesis and it’s very difficult for that to change unless the BRIC countries back off what they’ve been doing. But look at what India has announced. They’re trying to embrace it more,” he said.
He added that China's aim of slower growth over the next few years would ultimately be a good thing as a burgeoning middle class is given room to expand. But it would need some adjustments.
However, he said it was not just a case of opportunities lying only in the emerging economies. The current debt crisis engulfing Europe masked good news from the developed world.
“In view of the degree of pessimism and change in the developed world, there could be opportunities elsewhere. In the heart of the euro zone look at Germany, it’s not doing too badly. We seem to find it really convenient here in the UK to blame the euro zone for our own problems. If it’s that bad, how come Germany is doing well?
“Part of the answer is that Germany has become so well exposed to the BRIC story and that is what the UK, the U.S. and in particular some of the smaller European countries have to engineer,” O’Neill said.