Jobs, inflation bigger India worries than corruption: Mobius

Jobs, inflation bigger India worries than corruption: Mobius

Mumbai: Veteran emerging markets investor Mark Mobius cited unemployment, inflation and water as key concerns for India but downplayed worries about corruption, which has spooked many investors in the country.

“Corruption is rife everywhere in the world," said Mobius, who oversees nearly $52 billion as chairman of Franklin Templeton’s Emerging Markets Group, part of US asset manager Franklin Resources .

A spate of corruption scandals, headlined by an auction of 2G spectrum licences that may have cost the government as much as $39 billion in lost revenue, has battered the government of Prime Minister Manmohan Singh and rattled investors in Asia’s third-largest economy.

“It’s only when it really impacts the process of a business in a big way, then you’ve got a big problem, but that’s not the case here," he told reporters in Mumbai.

While many investors are bullish on the long-term India story given a youthful population poised to deliver a so-called demographic dividend that contrasts with an aging China, Mobius cited unemployment in India as a worry.

Inflation, including in food prices, and water usage are also concerns, he said.

“My number one concern will be unemployment. Not too worried about that now because the economy is growing at a very fast rate, but that’s one thing in certain parts of this country you’ve got to be careful about," he said.

India, on track to grow at 8.6% in the fiscal year that ends this month, will need to create tens of millions of industrial jobs in coming years to help absorb an estimated 100 million people expected to join the workforce over the next decade.

Mobius, who said he has seen little decline in investor risk appetite despite the crises in Japan and the Middle East, expects natural gas -- which has been a laggard in the recent commodities boom -- to see higher prices.

“The only one that really hasn’t moved very much is gas, but that is destined to move up as well," as a high oil price prompts a switch to gas, he said.

The Bombay Stock Exchange (BSE) benchmark Sensex is down 7.6% in 2011, making it the worst performer in Asia, with foreign investors net sellers this year after pouring in a record $29.3 billion in 2010.

Headline inflation WPI (wholesale price index) in India tops 8% despite eight interest rate increases since last March, with food prices a key inflation driver.

At the end of February, Mobius’s $16 billion Templeton Asian Growth Fund was 19.4% allocated to India, the fund’s third-heaviest weighting after China and Thailand, with energy-based conglomerate Reliance Industries its only Indian holding in the top 10.

While the fund was off 4.8% in US dollar terms in the first two months of this year, it had risen nearly 28% over 52 weeks and 14.4% on an annualised basis over five years.