View: What would money chase in 2047?

Many Indians are trying to conquer a lurking fear that they may get old before they get rich. Late, even early, millennials sense it. After paying the mortgage rates, many buy stocks and salt away a slice in mutual funds — far more than their parents ever did. Some are flirting with riskier bets, like cryptos and currency futures. 25 years from now, when independent India turns 100, their children, the Gen Z battling the odds, would have a bewildering array of assets to choose from. But none of these would ‘guarantee’ anything. Probably even banks, sooner than we think, could start giving ‘floating’ returns on deposits, like the floating rate they charge on loans. However, the thought of drifting towards an ‘age of uncertainty’ — the signs of which are already visible — may not unsettle the savers of New India who would not have grown up with the trappings of Old India: high interest rate on fixed deposits (that banks no longer offer), defined benefit pension (that GoI can’t afford), and guaranteed, predetermined annuity on retirement products (that insurers have long stopped selling). Not only would they develop a distinctly early bias towards equity — with stock options being a sizeable part of their pay — but macroeconomics, fintech innovations and evolving financial markets would also drive them towards new asset classes. Sovereigns across the world have run out of tools and imagination. The only way they can bail out economies is by keeping interest rates very low, for very long, while waiting for consumers and businesses to take the bait. On one hand, savers have realised, for more than a decade, that they have to look around for alternative assets, as bank deposits would miserably fail to build their nest egg. On the other hand, financial institutions have begun floating new structured instruments like real estate investment trusts (REIT) and infrastructure investment trusts (InvIT) to fund real estate and infrastructure ventures, thanks to reluctant banks and a shallow market for long-dated corporate bonds. REITs and InvITs pool in money, like mutual funds, by drawing investors with appetite for such assets. Though in their infancy, the number of such vehicles may multiply as investors, hunting for upsides, diversify portfolios. For the rich, the capital market may turn into a larger playground. REITs could tempt high networth individual (HNI) investors, driven by rising rental yields, to bet on the commercial real estate market in Bengaluru or Pune without actually buying reality stocks or locking large amounts in an office space. They could be drawn to mezzanine instruments — a hybrid of debt-equity that gives a borrower more flexibility and better cash-flow. Fine-tuning the bankruptcy code, quicker resolutions and listing of security receipts — which are close to 7-year bonds with the stressed company has the underlying — can gradually pave the way for a junk bond market in India. Successful listing of more startups (like Zomato) would whet the appetite of wealthy investors with higher risk appetite to chip in and sponsor alternative investment funds like private equity and venture capital. And deep-pocketed investors would eventually convince New Delhi to let them park more money in dollars, euros and other reserve currencies. Amid large foreign exchange inflows and a strain on RBI to buy and rein in the rupee, leading MNC banks, on behalf of their wealth management clients, have suggested a doubling of the limit on liberalised remittance scheme that allows a resident to buy stocks and properties of up to $250,000 overseas every year. Besides the surge in equities, there has been a frenzy in the Indian cryptocurrency exchanges. Cryptos may turn out to be fool’s gold. It may be squashed by RBI and anti-money laundering authorities. Or, it may survive with the backing of influential investors. But the year-long rally, sparked by a Supreme Court decision to lift a ban, exhibits the hunger of local punters for new, exotic assets — particularly those that mirror the price in the international market. What possibly would last longer than cryptocurrencies are digital assets like non-fungible tokens (NFT), giving one the right to own an original painting or music. A pen drive holding a Jpeg file is not the same as a painting on the wall. But, who knows, backed by blockchain, they may catch the fancy of young Indians. What would money chase in 2047? Some, as always, would find the urge to punt in exotics and riskier bets irresistible. Others would try to grow their money by spreading across multiple, new asset classes. But, whatever they do, they would have a far higher risk appetite. There’s little choice.
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