Calling it a “watershed moment” for liquidity flows into India, Raghavan credited the Reserve Bank of India (RBI) and the country’s regulatory framework for enabling foreign participation in the domestic financial system.
“This is a pivotal moment, much like 1991–92 was a pivotal moment for the equity market. Kudos to the RBI and the entire regulatory framework for enabling this to happen, because this will be a watershed moment for liquidity flows,” Raghavan said.
He noted that recent foreign bank acquisitions — such as NBD’s 60% stake in RBL Bank and SMBC’s 24% in Yes Bank — are just the beginning of a broader wave of inbound investment. “You’ll see more liquidity flows now. This is good for corporates, good for inward investment, and it has come at the right time,” he said.
Raghavan said India’s position in the global investment landscape is “inevitable”, driven by its large consumption base and rising disposable incomes. “There’s an inevitability to India ruling the waves. It’s a massive consumption economy — with 1.4 billion people, whatever we produce, we can consume within the country,” he said.
According to him, while the United States continues to dominate global markets and Europe is still finding its footing post-Brexit, India stands out as the next big investment destination. “Most people are moving up the consumption curve, and the quality of life is improving. You simply cannot ignore India,” Raghavan added.
On global growth, Raghavan said the momentum remains broad-based, fuelled by technology and artificial intelligence (AI). “There’s clearly an AI-fuelled boom that is absolutely omnipresent. If you’re not part of that entire AI regeneration, you’re going to get left behind,” he remarked.
He also said merger and acquisition (M&A) activity will play a major role in driving corporate expansion amid high valuations. “If you’re not growing organically, then it’s through acquisitions — and that’s really a big part of the growth theme,” he noted.
Below is the excerpt of the interview.
Q: Let me start with what our viewers really want to know — the growth story. You must be talking to the largest number of bankers since you head banking at Citigroup. Are you getting a sense that corporates are willing to invest? Is the growth story intact in the US and the global economy in general?
Raghavan: I think there’s clearly an AI-fuelled, AI-powered boom that is absolutely omnipresent. You can feel it everywhere. And you almost get the sense that if you’re not part of that entire AI regeneration, you’re going to get left behind. That is very, very real. It’s palpable, and everyone is investing. Everyone is focused on it.
Q: Okay, that part of the growth, everyone is buying into absolutely. I’m asking you, outside of the AI part — when you talk to corporates, what’s the sense?
Raghavan: I think there too you’re seeing growth across the board. If you look at that growth engine — technology, not just AI — it’s very much at the heart of it. For example, if you look at a major industrial company in the US, they’re looking at acquisitions in tech adjacencies like software. So, take a real die-hard core industrial company — they’ll look at tech adjacencies. If you take retailers, it’s e-tail. For autos, it’s autonomous driving and driverless cars. It’s really a tech nexus there. The same goes for healthcare. So, I think a tech undercurrent is very much at the heart of growth. But there is growth everywhere. The biggest wild card is M&A. With valuations where they are, if you’re not growing organically, then it’s through acquisitions — and that’s really a big part of the growth theme.
Q: I’m persisting with the growth story simply because when these tariff issues cropped up, there was uncertainty in the world, and there was a lot of fear that global growth would slow down. You’re not seeing signs of that? Give me the US and global picture separately, if you wish.
Raghavan: In the US, what you’re seeing is that maybe up to 20–25% of tariffs are being absorbed in most cases, some of it is being passed through. The inflationary impact of those remains to be seen, but right now, companies are keeping a lid on it, and most are assimilating the tariff impacts. If it goes beyond that, then the question is — you have to rejig your trade channels, look at your supply chains, and decide whether to friendshore, nearshore, onshore, or offshore. You have to play with the mix so that you’re still competitive and can keep doing what you do. But what you’re seeing now is an element of sanity prevailing. In most cases, there’s a base tariff that will stick, but beyond that, there’s always a deal to be done, negotiations happen, and you land somewhere that’s acceptable.
Q: Let me come to financial markets. What have you made of this rally in gold? Do you think it continues?
Raghavan: I think there are multiple drivers, and it’s a bit complicated. Clearly, gold benefits at times of turmoil — when there’s uncertainty, you flock to that asset. That’s one part. The other is that there’s a lot of Western government debt that needs to be rolled over or refinanced. There’s $30 trillion-plus in the United States, and then France, the UK, and others have large amounts too. A lot of that debt will come up for redemption or refinancing. A key factor is that not all traditional buyers of this paper will continue buying at the same magnitude going forward — because of geopolitical tensions and differing stances. So, I don’t think it’s entirely a coincidence that gold is at $4,000 at a time when government debt is piling up. The question is whether there’s any rebalancing happening within those portfolios.
Q: So, gold’s 50% rise in the past year — is likely to remain that way? You don’t see it getting corrected?
Raghavan: I don’t see any catalyst that could change that, barring a very stable world where all conflicts get resolved, everyone’s in a happy place, and we go about holding hands.
Q: Let me couch the next question in the context of your visit. We just saw NBD buy a 60% stake in Indian bank RBL, and before that, SMBC bought about a 24% stake in Yes Bank. So, foreign bank interest — not just private equity like Blackstone, but foreign banks interest has increased. Can you explain what’s driving this interest? Would Citi be doing more?
Raghavan: I think this is a pivotal moment, much like 1991–92 was a pivotal moment for the equity market. This is a pivotal moment for FDI and liquidity flows into India. Kudos to the RBI and the entire regulatory framework for enabling this to happen, because this will be a watershed moment for liquidity flows — just like the gates were opened for equities a few decades ago. You’ll see more liquidity flows now. Yes, you mentioned the bank investments, but I’d say this is auspicious for broad liquidity in general. This is good for corporates, good for inward investment, and it has come at the right time.
Q: I know you’re more focused on deals and banking rather than FPI or portfolio flows, but lately, flows have been going to China and some ASEAN countries. Do you see that reversing?
Raghavan: Absolutely. I think it’s a no-brainer. If you look at the big pockets of investment — America rules right now. It’s outsized. Nearly 70% of the world’s capitalisation is in the United States. US corporations generate 40–50% of the world’s profits. The pools of liquidity — whether in public markets, private markets, private credit, private equity, or public credit — are all there. So, if you wanted to invest, where would you go?
Europe, right now, is soul-searching a bit. The UK has its own post-Brexit issues that it’s navigating. France, you know the story. Germany is rediscovering its industrial strengths. Europe needs to refocus and rejuvenate.
China cannot be ignored — it’s an incredible economic power. We’ll figure out how to navigate China better and better, but right now, most are figuring out how to do that within the current framework.
And then, where else do you go? It’s India. There’s an inevitability to India ruling the waves. It’s a massive consumption economy — with 1.4 billion people, whatever we produce, we can consume within the country. Most people are moving up the consumption curve — disposable incomes are rising, and the quality of life is improving. So, you simply cannot ignore India. Portfolio flows will come. The market has had an incredible run. Retail interest has been very strong. I don’t have a view on how much leverage sits within that framework, but clearly, retailers have been big buyers here.
Another region that’s absolutely blossoming is the Middle East. Saudi Arabia, fresh on the back of FII, has incredible momentum and real energy in the market. Likewise, the UAE is booming, also benefiting from a lot of money flows coming from Europe and the UK. Within our wealth management and private banking business, we’ve seen a lot of money flowing out of the UK into the Middle East.
Q: Speaking of buoyant financial markets — how much would you worry about something like First Brands or Tricolor, or generally private credit? They’ve had an exuberant run. This is a market you must be watching closely. Are you worried about it?
Raghavan: I won’t make any reference to insects and stuff like that in this discussion! But look, I think in all of this, there’s a lessons-learned exercise. Could this happen at Citi? What went wrong? Every institution, after events like these, looks through its portfolio, runs checks, and makes sure it’s robust and resilient. We’ve done that at Citi and made sure our defences are intact.
Q: But it is a big problem, isn’t it?
Raghavan: There’s fraud here. My view on fraud is simple — if someone’s going to rob your house, they’re going to rob your house. All you can do is put all the defences, bells, whistles, and controls in place to make sure it doesn’t happen. But there will always be elements of fraud. From what I understand in these instances, yes, there are a few warning lights flashing, but it’s not a big domino effect. You’d be remiss not to take this as a cue to run your sanity checks and make sure your systems are strong.
Watch accompanying video for entire conversation.
