In this episode, journalist and author Puja Mehra speaks with Hemant Mishr, Co-Founder and Group CIO of SCUBE Capital, and former Managing Director & Head- Financial Markets, South East Asia, SCCG at Standard Chartered Bank. They talk about how rising geopolitical tensions—from the Iran conflict to great-power rivalry—are beginning to reshape the foundations of the global financial system. They discuss how the post-1970s financial architecture was built on three pillars: globalization, a rules-based order backed by the United States, and relative geopolitical consensus.

Mishr explains how that system evolved around the oil shocks of the 1970s and the emergence of the petrodollar, which helped anchor the dominance of the US dollar and the recycling of global capital through American markets. But today, shifting power balances, the expanding use of financial sanctions, and growing geopolitical fragmentation are testing that framework.

What does this mean for the future of the dollar, global capital flows, and emerging economies like India?

Tune in for insights into how geopolitics is reshaping the world’s financial architecture.

NOTE: This transcript is done by a machine. Human eyes have gone through the script but there might still be errors in some of the text, so please refer to the audio in case you need to clarify any part. If you want to get in touch regarding any feedback, you can drop us a message on feedback@thecore.in.

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TRANSCRIPT

Puja Mehra: Hemant, thank you so much for coming on the show today.

Hemant Mishr: Hey, good afternoon, Puja. It's always a pleasure being on your show. Thank you.

Puja Mehra: Tell us what you think about the conflict in Iran in terms of that and other geopolitical developments that we are seeing around the world, and how these are reshaping the global financial architecture. On the show, we discuss a lot about what is going on in trade and how trade is getting redefined, reshaped. And generally, we hear a lot on trade, but we are not hearing that much on the financial architecture.

And I would love for you to help us understand that side of things.

Hemant Mishr: So what's happened is, in some ways, Puja bolted out of the blue for the world and for India as well. And as Lenin put it very well, there are decades where nothing happens, and there are weeks where decades happen. Now, in terms of the global financial architecture, I think it will have some significant implications.

I'll beat at a very slow pace. And it's important to get the context. The current financial architecture that the world has seen over the past 50-odd years had three strong pillars to it.

The first was globalisation itself. The world was better integrated from a trade and capital point of view. The second is a rules-based order, with the U.S. being an enforcer. And I think it was Roosevelt who actually said, have a big stick but talk softly. But the U.S. policy has now changed. They have a big stick and they want to build it as well.

And the third, a world that was pretty much in consonance. There were no strong blocks that were competing for power. And clearly, the world is now at that point in time where there's a broad consensus that there's going to be a transfer of power.

And that normally is a bit disruptive. And there is an implication of that also on the financial architecture. Now, the current financial architecture, if you look at this, this was designed around the 1970s, when the Britain Goods Arrangement failed.

And that was also the time when the first oil shock happened in 1973. A consequence of that oil shock was a significant amount of wealth transfer from the consuming nations to the oil-producing nations. So that created what is called the birth of the petrodollar or the eurodollar market.

And this is because the Gulf countries and Saudi Arabia were the producers. The Western powers were the consumers. So there's a lot of transfer of wealth that happened.

And it was at that point in time that the US struck a deal with the Gulf monarchies to invoice energy in dollar terms. In return, it asked for the capital to be recycled into its own markets. And it also said, by the way, that it provides security guarantee to the Gulf monarchies.

So there was a quid pro quo. So what happened as a consequence, and in some ways, we are living with the consequence of that, is the capital ensured that the dollar markets had a life of its own. There was a virtuous cycle out there.

The dollar became the reserve currency of the world. The money coming into US financial markets meant the US financial markets were a lot more liquid. And they were attracting subsequent follow-on capital from the rest of the world.

And most importantly, the US treasury assets became the safe haven for the world. So that was petrodollar number one. Now, in my view, there's a perceptible change at this point in time.

Now we're looking at the petrodollar 2.0, if you may call it. Now, the US is a net energy exporter. And quite a few other Western blocs, other than Germany and the UK, are actually not energy deficient.

They're not substantial consumers. The biggest consumers are actually in Asia. It's China and India.

So the wealth effect, if it were to happen now, it will actually be from the Middle Eastern countries to Asia. That's an important context. Now, what does this mean in terms of implications for the future?

I think the financial architecture can evolve in one of three ways. The first is, you know, the war ends. We are back to BAU.

Things don't change. So the dollar dominance continues. And the dollar continues to be the reserve currency of the world.

It's currently 58% of global assets. That doesn't change too much. The second is a move of diversification.

Because most countries are, you know, in some ways getting a sense that, you know, this is increasingly a currency that is used in a weaponised form, whether through sanctions or tariff or the payment system itself. They're all, I'm sure, looking at ways of diversifying. The technology architecture also helps them do that, you know, with CBDCs and everything else coming into play.

So you'll potentially see an expediting of that particular move away from the dollar into the euro and the yuan. I think yuan has anyway substantially picked up. It's around 5%.

And to a lesser extent, the rupee. So that's scenario number two. Scenario number three is a fragmented world where you have a U.S.-centric sphere, which has got the U.S., U.K., Japan, some of the other allied countries, maybe Australia. The second is the China-influenced sphere. So that's China, North Asia, Southeast Asia. A lot of countries in this part of the world are pretty aligned there.

And Central Asia as well, and obviously including Russia. So those are the two poles. And then there is what is called the middle nations.

Not the middle nations the way Mark Carney calls it, but the countries which are non-aligned, which don't fit in either of the pockets. India, Saudi Arabia, I think would be two examples. Potentially Brazil.

And they become so-called the swing states. And by virtue of being swing states, I think they will have significant amount of economic clout because none of these first two states are going to be very, very strong. My own view is it's likely to be scenario two, where you will have the dollar's power and strength being diminished and quite a few other currencies taking over.

You will have other financial centres coming up. I mean, you're already seeing a lot of activity happening in Singapore. Hong Kong has come up, but you know, Shanghai, Dubai.

It's a big opportunity for financial hubs in India, Gift City and potentially Bombay. And what are the implications of this for India? The fastest growing major economy in the world.

It will be the biggest consumer of energy and host of other trade-related items. So the ability to swing any of these blocks is massive. But the most important opportunity is, how do you become a consumer of the capital surplus that gets created now?

Because these countries will have capital surplus, whether it's the Middle East or Japan or any other country. But India potentially has the opportunity to tap into that. And that to me, I think is the big potential advantage for India, this new financial architecture.

Puja Mehra: Okay, that's more medium to long term vision that you've been able to give to us. I'll come back to this discussion. Let's also first talk about what do you think will happen immediately in the markets, in the capital markets, in the rupee market.

We can't not have you talk about that.

Hemant Mishr: So, you know, this one, unfortunately, in the short term is a bit of bad news for India. While we're not directly impacted with the conflict, the knock-on effects are very strong. We are an energy consuming nation.

We import 85% of our energy requirements. Around 58-60% of that comes through the Middle East. And the transmission effect happens in a few ways.

It happens from a macro point of view. It happens from an asset market point of view, your reference to what happens to the rupee and whatnot. And lastly, it also happens from a strategic and a defence point of view.

Now, if I may talk about the first one, and I'm sure you've seen these numbers elsewhere, but I think it's important to kind of mention it, is a $10 increase in the price of oil increases our bill by around $20 billion. Taking a ballpark $4 trillion of GDP, you're talking about a 0.5% GDP impact. Now, when the RBI and the CSO and everybody else last computed the numbers, Brent was around $80.

We're currently straddling, but assuming the worst-case situation is $120, we're talking about a 2% hit to the GDP, which is quite substantial. It also increases inflation and current account deficit by around 0.4%. And I'm talking about a move by $10. Now, obviously, these are macro hits.

The bigger one that bothers me is the current account deficit. So we have a fairly okay current account deficit. I won't call it healthy, you know, at around 1% to 1.5% of GDP. But, you know, if oil were to settle at between 100 and 120, that number could easily be between 2.5 and 3. Now, that's where investors get worried. That's where your ability to finance your current account deficit becomes important.

So that's the macro strength. So anything above 100 on a sustained basis, I think is going to put some pressure on the Indian macro. And there will be a transmission effect on the government's risk as well.

I think the government of India has done a phenomenal job of tightening the belts. It takes me back to, I remember 2009-10 is when we engaged S&P on behalf of the Ministry of Finance. And at that point in time, a gross fiscal deficit was a double-digit number.

And we'll be closer to half of that. So it's a phenomenal job work that the government of India has done. But if they were to kind of increase subsidies and reduce taxes as a consequence of energy prices, it will clearly hit that particular trajectory.

The fisc will expand once again. Now, the asset market, I think the most vulnerable part remains the rupee. We get a substantial part of our flows from the Middle East.

Around a third of the $120-odd billion that we receive as remittances comes from there. And it's safe to assume that even in the most beneficial form, I think it will get hit for the next two to three months. So you're talking about a $4-8 billion not coming in because people are all worried.

They'd rather keep the money there to sustain themselves than remitted back home. I know lots of people who've been told by their employers to leave them at least. Obviously, when they do, I think they're not going to get their pay and whatnot, which is going to impact the invisibles that we get from there.

So that, I think, is going to create a short-term demand-supply mismatch on the INR. And it's going to wait. I'm sure the Reserve Bank of India is at it and doing an exemplary job, not just in terms of meeting the demand-supply mismatch, but also administrative controls, which might well be needed at this point in time.

It impacts interest rates. We've had a downward move in interest rates. But if inflation starts tightening, which will happen if oil continues to be at high levels because it increases CPI by around 40 basis points.

If oil continues on a steady-state basis to be at $10, then the RBI will find it very difficult to reduce rates. And the RBI is not reducing rates. It clearly impacts the borrowing cost of companies, their earnings per share.

So there's this entire transmission effect across all asset markets. So that's on the asset market. On the strategic and the defence stuff, I must give credit to the government.

I think they've managed relationships with a plethora of very differently-driven countries very well until recently. But it's going to get more challenging now because we've got a relationship with Iran on energy. We have a relationship with Israel on defence and technology as well.

And then with the Gulf also, we've got relationships on energy. And then we have a relationship with the U.S. on trade, energy, and also defence and tech. So managing some of these when they are not necessarily coexisting, they're at war with each other, is going to be a bit of a challenge for India.

And we've got to be cognisant of that. So net-net, if oil kind of settles around the $80 a barrel, I think India can comfortably pass through. But anything on a sustained basis north of $110 is going to put a bit of pressure.

Having said that, we've got strong FX reserves, around $700 billion. We've got one of the smallest external debt as a percentage of GDP. So very well positioned getting into the crisis, and thank God for that.

So we've got shock absorbers, which can help us absorb the shock for a short period of time. And we're hoping this doesn't continue. It's a matter of weeks and not months.

But God forbid, if it goes beyond that, then I think we'll need to manage the situation in a very different manner.

Puja Mehra: So we have a much bigger buffer of forex reserves compared to what it was, say, when the global financial crisis happened or the taper tantrum crisis happened. But if the war doesn't end in, let's say, the next 7 to 10 days, then how concerned would you be about the markets and the rupee especially?

Hemant Mishr: So I'll be concerned if the war doesn't end in a couple of months. Honestly, it's given that the war might not end in the next 7 to 10 days. Even if it ends in 7 to 10 days, I think there's a significant supply disruption that's already happened.

We've just heard the CEO of Saudi Aramco talk about the disruption that's happening to their supplies. So the damage in some ways is done. In my view, I think you're talking about it continuing for a few weeks.

He might just make an announcement, but things might again come to a boil, and there might be again a series of attacks and whatnot. I get worried if it goes above two months, and if there are no strategic reserves that are released, or if the waiver to India doesn't get extended, if Russia can come in, I think that solves our bill. So that's a good point, Puja.

So you have to be mindful that India has actually got a double whammy of sorts, because we bought substantially discounted Russian oil last year. Then we had to buy on a market price basis, and now the market is itself at a very different prime. It's at a substantially higher premium.

So we've got a double swing factor that's hitting us. So there are ways of resolving that. If the Russians flood the market and it comes our way, I think that might work well.

But it doesn't bother me if it doesn't end for a week or so. If it goes beyond a couple of months, I think that's when the Reserve Bank of India might have to withdraw a little and let the rupee weaken. In that case, it could well go beyond the 95, 96 mark.

So when you look at the economies around the globe, one of the most vulnerable economies is India. It's actually Italy and India. Remember, this is slightly dated, but a decade ago, when oil used to go higher, the most popular hedge fund currency trade used to be buy oil and short the rupee, because they're substantially negatively correlated.

A lot has changed. Clearly, we export a lot of petroleum stuff. So we import crude, but we export a lot of derivatives of energy.

Having said that, we continue to be hit very badly. So I get worried if it goes beyond a couple of months.

Puja Mehra: So when you talk about the India growth story, so far, we used to talk about it in a certain context, the world being what it was. We've all begun to recognise that trade-wise, the world is changing, and we are seeing in some sense, I hear people say, people who know more about these things than me, say that we are seeing the end of diplomacy. Diplomacy is a very limited tool now.

We are seeing use of raw power. Countries don't know how to manage President Trump and the White House. A lot of decisions that they're taking, we've been seeing this in Venezuela, we're now seeing this in and around Iran, are damaging economies, and economies are not having a say in, countries are not having a say in what goes on in their economies.

How does this change the way you look at India's growth story? How much is all of this risk, or are we resilient? We know that India is singing for its political and economic stability.

In fact, the Indian government keeps saying that in a period of turmoil, India is an island of relative stability. But are we really so insulated, and can we just think that our growth story is going to remain relatively unaffected?

Hemant Mishr: So that's a good question, because I think the world has changed in many ways. I think there are a few things that have changed the world more than the current U.S. administration and the policy world face that they've done. But I think it's important to cut the noise.

There's a static piece and there's a dynamic piece. The dynamic piece is the decision-making out of the U.S. That keeps changing every now and then, and obviously it has a knock-on effect on quite a few countries. India is actually one of the countries where it has a substantially lesser impact than the rest of the world.

And the reason for that is we are very domestically driven. And this was borne out by the way, I think, when the second nuclear blast happened. And we had sanctions on India, and everybody thought this was going to go down and India was going to get into a depression.

None of that happened. It also happened when the 50% sanctions happened. I think people were pleasantly surprised at how resilient our GDP was.

Obviously, we take a hit, but we're not China. We're not that externally dependent, which is why I think it's important to have the context right. Having said that, there's also a sense that India, and you and I have discussed this, India from the inside looks a lot better than from India from the outside.

But there's always this glum attitude that this is a preordained stuff. You know, 2047, we will become a developed country. We will achieve that status and whatnot.

And nothing is given. We've got to earn our place in the universe. So the dynamic piece is what it is.

I think we've got to stick to our agenda, and which is what I think this particular government is very focused on. They obviously have to manage. They've got to manage the external environment.

And you're right, it's entirely transactional. It's not long-term, which is why you've got to take very pragmatic decisions on what is best for you. And I think India first, in some ways.

That, I think, continues to be the policy. And that's how the rest of the world is looking at it. It started with America first.

I think now it's everything. In fact, one of the things that I strongly believe is whether Trump succeeds in making America great again or not, he'll succeed in making quite a few other countries great. He's surely pushing Europe to become great again.

They're making difficult decisions. They're substantially increasing their defence budget. You know, if you've been tracking that number, he's pushing China.

He's actually enabling China to become great again. And if the Indian government seizes the moment, he will help India become great again. India has always made difficult decisions in a crisis.

1991 was a watershed moment between Prime Minister Narasimha Rao and Manmohan Singh, what they did. I think what Jaitley did during the GST stuff, 2016, and the pandemic reforms, right? To me, I think this is one of those pivotal moments.

I think we've got to just tighten our belts. We've got to do a few things. We can't be in a state of denial.

India is not the bright, shining star that the rest of the world is actually dying to invest in. Yes, it's got a significant GDP growth, but it's an extremely difficult market to invest in and it's an extremely difficult market to exit out of. I'm in Singapore and I face a lot of those issues.

Now, what do institutional investors look out for? Institutional investors look out for scale, liquidity, and predictability. And India hasn't got scale.

I mean, the scale that India has is in its population. It also has scale in its GDP. But when you look at accessing India from a financial markets point of view, equity markets are a great story, but it stops there.

I think beyond that, if I'm looking at investing in bonds or credit or venture or private equity, unfortunately, India is not adequately financialized. That's, I think, one of the first things that India needs to do, which has an impact on liquidity as well. Now, the bigger institutional investors globally, the sovereign funds, the pensioners, the insurers, they will typically want to invest size, and when they want to exit, they should be allowed to exit in size.

The liquidity constraints in India are pretty high, other than in the equity markets. Listed equity markets are obviously in a different league. Predictability.

And this is where I think India must get its act completely right. I think whether it's tax or solvency or the resolution regime, all of that, yes, we've come quite a bit of distance, but that's not what the rest of the world gives us credit for. They compare us to other countries where it's a lot more smoother, a lot more predictable to do business.

So there's quite a few things to be done. The two other things that I think are important is, I think the FX bit. Predictability on the FX and on the macro.

And I must say on both of these, India has done exceedingly well. I think the macro position, I think the government of India has managed it exceedingly well over the past decade or so. And clearly, the foreign exchange until recently was very stable.

So India has always been a country that's disappointed both the octopus and the specimen. And you always have those people who will either love India too much or hate India. But I think if we can get our act right, deliver a 9% to 10% GDP, which is actually needed for us to become a developed economy if we are to become a 2047, that's not an easy ask.

You're going to need a substantial amount of capital. When China was transforming 1980 to 2010, they raked in around $3 trillion of capital in terms of foreign flows. Has India got the capacity to take that kind of money?

I'm not sure. I mean, if you have that kind of money coming in every year, you will have the rupee going completely bonkers. So I think providing depth to our markets, obviously manufacturing will have to be at least 24% of the GDP.

Internationalising the rupee, I must give a lot of credit to the People's Bank of China where 2010 onwards have been following their markets. And for a communist country, they took some very aggressive views in having the offshore yuan market. Encouraging the offshore yuan market, testing that through a pilot, setting up the Bond Connect and the Equity Connect programme, which ensured that investors could actually invest in China without actually taking China-related risks.

So they came in through Hong Kong. I think the Indian government will have to think of innovative measures using Gift City or, for that matter, Mumbai. And as a consequence, position for the 2047 objective and absorbing the amount of capital that we're talking about.

Puja Mehra: You said that you're impressed with the forex market. We have in recent times heard commentary, including from the IMF, where they've not been very happy with the way the exchange rate has been managed by the RBI. Do you want to say why you have a different view?

Hemant Mishr: Yeah, so I haven't read the IMF statement, but I think this is a space that's evolved a lot, which I must confess. There was a time when any interventionist policy on the FX was supposed to be a four-letter word, but gone are the days now. So I think people understand that any external noise that creates volatility in the market, I think the central bank is very well within its right to cut it out.

Now, the RBI's exchange rate policy, and I'm judging the RBI from the policy itself, is about not protecting a particular level, but stamping out any excessive volatility. And I think they've done an extremely good job over the past five to seven years. They have not been intervening more than is needed in the market.

They've let the marketplace decide on that. They've actually encouraged the offshore market as well. So Indian nationalised banks have been encouraged to build the non-deliverable forward market, which is very important, because there are lots of investors.

How do you internationalise a rupee? If you have to internationalise a rupee, you need people to be given the tools to hedge that particular risk. Now, if I'm taking an exposure overseas, I will only hedge that overseas.

I don't want to hedge onshore, right? So on that bit, that's important. Now, the RBI uses an index, and I'm sure you're well aware of this, the real effective exchange rate.

So within that, there's a boundary condition they're trying to define. In the past, that band was 5%. But the RBI over the past five years actually allowed the rupee to move outside of that as well, which has shown a lot of confidence.

So I don't know where the IMF is coming from, but they've actually allowed the markets to take the rupee to a substantially different part of the band than has been allowed in the past. So I think they've let market forces play their role. Having said that, I must say that the liberalisation process on the rupee should be a lot more stronger.

I'm not talking about capital account convertibility. In fact, I just referenced the China example, what they've achieved and all this capacity to absorb a significant amount of foreign flows. The FBI and whatnot, without making the yuan convertible.

So you don't need to make the yuan convertible. And by the way, it was the same IMF that, until 15 years ago, used to ask for convertibility as a precondition for any of this stuff, but they've been proven wrong. But internationalising the rupee, I think is an extremely important step.

I think the corporate bond market in India has been a stillborn baby for a long, long time. Where I'm disappointed is that credit as a percentage of GDP for the private sector in India is one of the lowest. It's 55% to 60%.

Now, how do you actually get a... If I were the prime minister of the financials of the country, that's one of my top priorities to fix. How do you get a country to run at full steam if it's short of money, if it's short of credit?

Most countries are north of 150%. You don't have to be north of 150%, but you can at least be at 100% of the GDP. So allowing more banks, allowing more entities that can provide for credit, using a technology smartly.

There are a lot of new age fintech entities that can get into unbanked or underbanked areas. So internationalising the rupee, providing depth to the credit and the bond markets, and letting some of the financial centres. And I think India doesn't need one financial centre.

India needs at least three, four. I mean, China for its size has Shenzhen, Guangzhou, Beijing, and Hong Kong as well. Why should India only have a gift city?

Maybe it needs to have one in the north and one in the west, and obviously, Bombay is very well positioned for that.

Puja Mehra: China's currency policy is quite frowned upon internationally. Do you think that is the way India should go? Is that what you're recommending?

Hemant Mishr: So I'm not recommending that. I'm saying it serves a purpose. For a communist country, you have to give them credit.

If you look at the journey from the 1980s onwards, it's fairly well planned, and it worked for them. It doesn't necessarily work for us, but it worked for them, right? So the first thing they did was they opened up some territories, the special economic zones.

Shenzhen was the first one that they opened. Closer to Hong Kong, they said, least disruptive. They're good pilot projects, right?

This is our venture capitalist thing, you know? Let me do a pilot project on this thing. If it works well, I can scale it up.

They set up a few more. Guangzhou came next and whatnot, right? Now, in these territories, there was some degree of liberalisation that was permitted.

When that succeeded, that was extended, right? Now, the Yuan, what was the next thing that they did? They substantially increased infrastructure spend and manufacturing capacity.

For that, they needed FDI, and the manufacturing capacity is not for domestic consumption. It was for exports. This is also when China became a member of the WTO in 2001.

Now, between 1980 and 2000, the Yuan was substantially weakened, and this facilitated their becoming an export powerhouse. Now, it worked very well for them because they wanted to be the workshop of the world, and they did a brilliant job for that. I think the bit that I liked most was for a currency that was fairly fixed for a period of time, they actually let it move to meet their national objective.

And as importantly, when they wanted capital, they came up with some very innovative solutions, like the Bond Connect programme effectively meant that investors will come and put the money in Hong Kong accounts, and assuming Puja is a seller and Avanth is a buyer, and you put in $10 million, I put in five, it's a net $5 million that goes on to China. So it creates lesser volatility, but you still get to see the entire flow. So I think some of those were very brilliant examples, testing two markets.

I mean, I remember as a banker when I was there at Stanchart, we had a debate on whether this will fail. No country in the world had ever had two currencies of its own, the CNH and the CNY. And it didn't fail, right?

It eventually was unified, but that's how they did the pilot project. So I think they came up with very innovative examples of what worked for them. I think we've got to come up with our own bet, but the way I tend to think of this is, you miss 100% of the shots that you don't take.

If you have a very aggressive view of yourself that 2047, you want to achieve something, some of these, you'll get it wrong, but you've got to just go all out. And there is not a better opportunity than now, because look at the rest of the world, right? As Larry Summers put it, Europe is a museum.

Japan is an old-age home. China is a prison, he calls it, because money goes in, money doesn't come out, right? I tend to think of India as a construction site.

It's very messy, but you're building for the future. And that's where you get scalability and you get substantial IRR. So I think we've got to just position ourselves well for the rest of the world, become a lot more welcoming, but also provide the plumbing and infrastructure for those investors to come in.

Puja Mehra: India needs a lot of capital, and you said that India doesn't look as good from the outside as it does from the inside sometimes, and for the reasons that you just discussed, including liquidity in the markets, the depth of the market, and the financialization levels of the economy. Will you say a few, you know, to-do things that could be done, some low-hanging fruit that could be done that you'd like to recommend towards increasing these things?

Hemant Mishr: Yeah, so one of the things, and I was in the US for a roadshow and just came back last Monday. So one of the things that amazes me is when we talk of India versus China, people in the US dislike China, but they invest in China. People in the US, and quite a few of them like India a lot, but they don't invest in India.

So that's observation one. The second observation is, it's surprising to me on how many people I've met out there who've not made money in India. They've actually invested in India, but they've not made money.

The reason being? Lost IRR. So the IRR was low, or the company didn't do well.

Misgovernance. A host of reasons, right? Now, I remember, and obviously as an Indian, and I'm there in India every month, the inside view is, these guys are fleecing us.

They're ripping the country. They're making all the money and they're bankrupting the nation. So I think it's important to get the narrative right because these guys have, I mean, somebody has extra money, capital is fungible.

They can put that in Brazil, or for that matter, Greece, or for that matter, in India. In fact, I met a firm in New York and I was building a case for an Indian investment at a particular IRR number of around 14% in dollar terms, and he said he's got something from France at more than that. Why would he invest in India taking cross-border risk?

So I think that's the discrepancy in the view. But there's also a view overseas that India doesn't need foreign money. India isn't bothered too much.

Now, that view I don't think is true under the current government. The current government is damn serious on attracting money because they have a substantial aspiration of the country. So one of the first things I think you do is get that particular messaging right because we've lost around $20-odd billion of money.

In fact, just when I was in New York, one of my friends actually said, does India care about foreign investors? I said, why do you tell me that? Because this year you lost a lot of money while the rest of Asia has seen a lot of money.

But there have been no roadshows. I've not been invited for any roadshow. So I think that I think is important.

India should go all out. The right kind of money. You don't want hot money, but the rest of the world has a lot of long-term money that is needed for all the railways and the ports and the highways and everything else that we are trying to build.

So that I think is the first step that I do. The second step is get a deeper rupee asset pool. At the end of the day, you need to financialize the country and offer your own currency products.

And that's the only way you reduce risk for yourself. So let the rest of the world invest not just in rupee equities, but rupee bonds, rupee venture capital payoff, rupee investment trust units, rupee REITs. And this is what I say when I'm talking about financialization of instruments.

So the more you financialize and the more you let offshore investors come in, they are taking the risk. And you're giving them a rupee IRR. So that's my second observation.

Third observation, which is an enabler for the second, is internationalise the rupee. I think come up with a clear plan on when you want the rupee to... I mean, you've seen the pilot with a lot of other stuff.

When you want it to be an international currency, both for trade and capital, and get a plan around that. And obviously, you know, work jointly with the Reserve Bank of India. An enabling factor for the third is financial centres.

I think Gift City is a wonderful example. Again, the same US roadshow. A lot of people were asking me on Gift City.

It was a pleasant surprise. Until two years ago, nobody was. But given the Prime Minister's push, it's now taken a life of its own.

India needs more. A place like Bombay is always there. And there should be one in North India as well, right?

So if we can have these financial centres, then the capital surplus that gets generated by a lot of these areas, and they don't necessarily want to meet it directly. Some people don't want to be directly in India. Some people want to access it through an offshore centre, which until now was Singapore, Hong Kong, and Dubai.

But if we don't want that to be done from those centres, we should create some of our own. So those are the four pointers that I would have to give.

Puja Mehra: Sure. And I think all of these tie in with your initial remarks on how the world of finance and global financial architecture is changing in the new geopolitical, geoeconomic context. But anything that needs to be done from that point of view also, given you said that you feel internationalisation of the rupee is going to only increase in this new world that we are in?

Hemant Mishr: So it automatically increases. I mean, internationalisation of the currency, our own currency, reduces the risk for us. Because the world realises this.

And again, I'm going back to Bretton Woods, right? When that discussion was happening, I think the U.S. Treasury Secretary made a statement to his European counterparts saying the U.S. dollar is our currency, but it's your problem. We don't want to live with somebody else's problem, right?

This is not just India. I'm sure policymakers all around the world are cognisant of the weaponization of FX that's happening, of currencies and payment, as I say. So the more we internationalise our currency in the global south, in energy contracts, in bilateral trading systems, I think we've got a lot of clout to do that.

Now, one of the other stuff where I must give credit, and there's a lot of the discussions we were having with the Reserve Bank of India, and I must confess, when the first time they started discussing about this, I just couldn't get it. They were always asking for, this is all weaponization of technology. And this is conversations in the, you know, late 2008, 2009 or thereabouts.

They used to insist that all Indian clients' data should reside onshore. And if you remember, MasterCard had a bit of a problem doing money. And I must confess, India, at that point in time, was the first country that was asking for it.

And this was a lot of foresight, and this is about weaponization of technology and data in some ways. But I think these are risk-mitigating strategies. So there's a new financial architecture that's coming in, and the financial architecture is not different because it rides on the back of a technology architecture that's evolving, right?

So we have to be cognisant of the new financial architecture that's enabled by the new technological architecture as well, and which is where we have to risk-mitigate ourselves, while still being very well integrated with, you know, the trade and the capital corridors because we are going to be a recipient. We're going to be a consumer of that, right? You know, India, it's still a threshold nation.

I mean, you know, we are still $2,500 per capita, and, you know, if you need to achieve a developed market status, we have to be 5x of that, at least 12,500, which is quite some distance. So we can't live an isolated life. We can't be a seller.

We have to be integrated, but in a way that risk-mitigates. To me, I think internationalising the currency in a calibrated form is one such distinct, but also, you know, being that swing that I spoke about, the swing factor, and being the largest swing factor because you'll be the largest economy, I think that will help us get bargains and deals which actually work towards a long-term objective.

Puja Mehra: Right. Thank you. Thank you so much.

Hemant Mishr: Hey, thanks, Puja. Pleasure talking to you. Take care.