Warren Buffett in India: I don't consider India an emerging market

On his maiden visit to India, billionaire investor Warren Buffett said he is looking forward to using the enormous cash pile of flagship firm Berkshire Hathaway to acquire companies in India.

You have made investments across the globe. But we are yet to see anything significant from you in India. Are you not impressed enough? Not buying into the India growth story?

Better late than never. We have made most of our investments, probably 85- 90% in the United States. In recent years, we have seen more opportunities outside the US and we continue to look at the large countries like India because we need to make large commitments to make them meaningful for Berkshire Hathaway and India is a very logical place to look. So I hope I spend some money here.

Besides philanthropy, would you also be exploring opportunities to invest in India?

This is not primarily a trip to do that (exploring investments). I may learn something like I always do when I travel around. Bill Gates and me are meeting shortly to talk to a group of wealthy people here about what we have done in the US with the Giving Pledge. We have an insurance operation that’s just started here. Ill be talking to a lot of people over these three days and I’m sure some of them will give me a lot of ideas.

You have a partnership with Bajaj Allianz for insurance in India. As far as the investments in the financial services are concerned do you think there are any regulatory issues that concern you?

There are various rules about how much you can own of a business. I believe the limit in terms of insurance company is 26%. We do not have an insurance company here now. We have an agency. Obviously, it would be more attractive to us if we could buy more than 26% of a company. That is a factor in this industry . You put the same amount of effort into a company you own 26% in and in the company you own 50% or 75%. I would say, for some time, our activities in the insurance business (in India) will be at the agency level rather than the under writing level.

Penetration of domestic savings in the equity market is low compared to other countries. What is your advice to Indian investors?

My advice would be the same that I’ve been saying in any country. Invest in what you understand. Don’t get outside of what I call your circle of confidence. Don’t try and buy and sell actively. I don’t know how to do it. Buy into businesses where you feel that they have some kind of a sustainable economic advantage over time or you feel good about the management or you are not getting too high a price to make a purchase. That’s what I’ve been doing all my life and it works okay.

Do you think that the Indian government has done enough to make India an attractive destination?

I think India has done pretty well without my advice.

What will you tell PM when you meet him?

Any conversation with the PM will stay private.

Why has it taken so long for you to come to India? Perception of the Indian economy?

I guess you will have to regard me as a bit retarded. I should have been here much sooner. I’ve been sort of a stay-at-home fellow for most of my life and many countries I’ve visited and I won’t name them for fear of offending them.

What is your perception of the Indian economy?

I arrived here about two hours ago. So, I have no new perceptions except that I think this is a wonder place. I wish they had such places all over the world. But I will be seeing more of the Indian economy. It would be presumptuous for me to say anything just two hours after I land at the airport.

How do you see the upheaval in the Middle East as an investor? Are you concerned about your investments in this scenario?

I won’t be discussing the activities of the American government. We have investments all over the world. There will be things such as the terrible tragedy in Japan. There have been all kinds of things that have happened in the US during my lifetime . We have had 9/11, we have had the panic fall of 2008. But most economies in the world march forward over time. My children will live better than I do. My grandchildren will live better than my children. That’s been the history of the market society. That will keep producing the same kind of results in the next century as they have in the last century . No doubt about that. There will also be interruptions from time to time. That’s the nature of Capitalism and the share markets. That’s happened many many times in my lifetime and the main thing is to keep an eye on whats going to happen over five or 10 or 20 years. If you are right about the business that you are in, then you will do very well and that’s what we have done.

You visited China before India. Is that an indication that you are far more bullish on China than you are on India?

The first time I went to China was in 1995, Bill invited me. My wife and I went there. It has nothing to do with priority.

You are seen as a role model for phi lanthropy. How should one approach it?

It is tough. The market system does not give you feedback on philanthropy like if you are running a business . If open a restaurant, and the public doesn’t like your food, you will know. if you do the wrong things in philanthropy, you don’t get a feedback from the market system. It is more difficult because you are tackling the tougher problems in the society. In business, you can look for easy situations but in philanthropy, you are tackling problems that are defying intellect and money for a long period of time. It’s a tougher sort of thing but its vitally important . Just because an activity is tough, you do not ignore it. You do your best. Its much more difficult than business.

Will you take up the Posco issue with PM?

We will be talking about what the PM wants to talk about and not what I want to talk about.

Is there anything in the India growth story that you think was outside your circle of confidence?

There are many activities outside my area/activities of confidence including some in the United States. There are number of businesses or industries that I know are going to do well but I don’t know which companies are going to do well within that business. For example, in the US there were roughly 2,000 automobile companies, out of those few failed. It wasn’t hard to figure out that auto industry have a wonderful future but it was very hard to figure out which company to buy and that is the way I think many industries are evolving. I focus on things that I understand very well. It would be the same way in the US and anywhere else. It would be business where I understand the future is reasonable well for the next five to 10 to 20 years. It may not be the industry that is changing rapidly. Where there is rapid change there is going to be few successes and many failures and I am not good at predicting which one would be successes. So, I look at industries with relatively modest rate of change where people are doing well today and will be doing well in five to 10 years from now.

How bullish are you on emerging market considering the fact they face high inflation and big deficit?

Well, emerging markets are tougher. I don’t consider India as emerging market, I consider it as a very big market. But if you look at what many classify as emerging market, the business tends to be much smaller . We need to invest billions of dollars and that is very tough in emerging markets. They are just not that larger. We tend to look at larger countries like India, China, Brazil, UK and Germany. They fits us but very small markets just not fits us. Although I would add that our business do goes into those countries. We own 70-odd businesses and obviously they want to expand in those kinds of markets. But in terms of making big stock investment they are not good prospect for us.

Bangalore found a reference in many speeches made by President Obama when it comes to the outsourcing debate. There seems to be fear that jobs have been outsourced to countries like India and China. How does the average America see India? Are we seen as an economic threat to America?

There are 309 million Americans; some people will feel anything is a threat, whether it is India, China or Japan, you name it. But I am an enormous believer in trade. Right now, the US is exporting perhaps 12% of its GDP — up from 5% four years ago, and that is a good thing. But it would be an even better thing if one was exporting more and importing more. Trade is essential to world’s prosperity and the more prosperous the rest of the world is, the better it is for the United States. The world is not a zero-sum game in terms of trade and economic activity . In fact, it is just the opposite; the more India and China prosper the more people in United States would prosper over the long term. There are people in every country that resist that idea, whether it is US, you name it around the world. But I think they would be shown that they are wrong by economic history and they would continue to be shown wrong.

How big is the corruption issue for foreign investors like you?

Corruption will be an issue in any market and you run into that in some degree around the world. But it has not been a big fact and we have not seen much of that in terms of the businesses . we look at. We have been deterred from a few investments in US because I did not feel good about the management. and that would continue to be the case form time to time. But obviously if there is corruption it is something to stay with, but that has not been a hindrance in investing over my lifetime.

How do see the US economy doing right now?

The US economy has been improving fairly steadily but not at a great rate. It is harder to say what are the major factors. People talk about fiscal and monetary policies and that is important. But I think the most important factor is underlying resilience of capitalism and the American economy which is functioning day by day. I think President Obama has followed policies that have been in the right direction but I think all three of those factors are important. The American economy is getting better month by month.

What investment risks you foresee in India?

Investment risk is when you misjudge the future of the company you invest in. I’ve made plenty of mistakes . In the US, over the last 60 years, sometimes I have misread the future and when I misread the future . That’s gonna happen to me again in the future.

Do you see potential in the Indian IT companies?

There is potential but I won’t know which ones. There will be many big ones but I wont be in them. Because I don’t know which ones will be the winners. I met my friend Bill Gates in 1991 and he very carefully explained to me. We talked about 10 hours. We hit it off very well. We had a good talk. when he got all through, we thought he was the smartest guy. and in the end we brought all of the hundred shares of Microsoft. but in the end, I didn’t know all about the business. I wouldn’t know what they would look like five years from now. I know some of them are going to be huge successes. But there are other people who are smarter than me about that. I just have to stick in that little area that maybe I have an advantage in.

Would Mr Ajit Jain be succeeding you in Berkshire?

I will tell you he is much better than I am. I owe the people of India an enormous amount for sending me a person like Ajit Jain. He walked into the office on a Saturday, I think it was in 1985, and I knew I was looking at and talking with someone with incredible talent.