Blackstone readies $100 bn cheque for India

India is the best performing market for Blackstone, president and chief operating officer Jonathan Gray told Sruthijith KK in an interview. The world’s largest alternative asset manager aims to double its investment in India to $100 billion, he said, adding that the sentiment on the country is still positive. Edited excerpts:From your perch, what are two causes for concern about the global economy and two for optimism?Obviously the wars in Russia, Ukraine, as well as West Asia, which are causing commodity prices to go up. Agricultural prices are impacted, and that has pushed central banks… part of the reason they’ve had to move to raise rates as opposed to lowering. That ties to my second concern–the rising cost of capital. Interest rates around the world are going up. We’ve seen 10-year treasuries in the US go up by 80 bps in the third quarter. In Europe, we’ve seen a pretty significant rise, particularly in France. This is really a combination of the war, or the wars, and the inflation caused by that, as well as concerns around government deficits.Also Read: Blackstone has $100-billion plans for India in 5 years, says COO Jonathan GrayAdd to the mix this huge AI capex build and what that is doing in terms of demand for capital. All of that will likely lead to multiples coming down a bit for assets. That’s the major impact.On the positive side, I would say two things. One is we still see a lot of economic momentum. In the US, very strong revenue growth at our companies. In India, strong revenue growth. The second thing is AI diffusing into the economy, and the productivity we’re beginning to see at our companies, which is pretty remarkable.On the AI infrastructure build-out, is this investment sustainable? McKinsey’s State of the AI report earlier this year said adoption is deepening, but enterprise returns are flatlining. We’re also seeing some concern with AI debt…Whenever you have a large innovation and then capital flowing towards it, there’s a risk that things go out of kilter. First off, the demand is just continuing to grow, and I would say at our companies, the returns on investment seem remarkable. They’re finding new ways to use this technology. We have a garage door opening company that’s using AI visualisation tools to recognise when the package is coming from Amazon, then automatically opening the door. They’ve created a $50 million business that they think will be a $500 million business.We’re finding use cases in legal and accounting and all these different areas, and our teams at times can find it difficult to get this deployed, to get the technology right. If you think about a classic bubble–telecom infrastructure in the 90s–the supply was built with leverage well in advance of the demand. It turned out to be excessive, and ultimately there were a lot of losses.In this case, most of this is being built out by the biggest companies in the world who have very healthy balance sheets. What we’re seeing is demand is running ahead of supply, and the supply of compute is constrained by getting entitlements, getting a power plant, getting turbines, getting chips, amassing capital. We have a fundamental shortage of compute, and that is supporting the value. Most of this is now being contracted by very large companies such as Microsoft, Amazon, Google.How does the firm view the Indian economy in the medium and long term?Start with the short term. Obviously, there’s been some negativity because the wars have driven up energy costs. There’s been some pressure on IT services valuations with concerns about AI disruption and the market was trading at a very high multiple here. We’ve seen the sentiment in India, people have gotten overly negative, (but) when you look at the medium and longer term, you’ve got an economy that’s growing at 7%-plus, a very young population.There’s a lot of things that give India an edge over time, and I see it as the fastestgrowing major economy for many decades to come. As an investor with a long-term perspective, we say this is actually a pretty good moment. As the market’s pulled back, that creates a better entry point for us. We take a long-term view. I remember back after the financial crisis, most investors were saying, “Oh, India, gosh, I don’t wanna do that.” We stuck through it. That turned out to be the right decision. This is nothing like that. But again, if you look at the long-term fundamentals of this economy–the rising middle class, the opportunities that will create, India’s opportunity to be more of a manufacturing powerhouse globally–there are a lot of interesting places to deploy capital.You mentioned IT services and pressure on the sector. How do you see that playing out?I think these IT services companies are much more adaptable than people realise. They’ve moved from just providing services to be AI deployment companies. If you think about most enterprises, it’s not like I could hand you Claude code or Codex and say, “Change your business. Make your…