Opinion on short-term market direction is currently divided. So let me stick my neck out and say it aloud: the bull market is far from over. I could be wrong about short-term trends this year, but 2005 is as good a time as any to stay invested in the Indian market. This applies to any individual as long as he or she stays true to asset allocation parameters.

Conventional good sense may advise caution. The US Fed is set to raise interest rates more aggressively in the future due to rising worries over inflation.

This is widely expected to draw money back into US treasuries, prompting outflows from emerging markets. The FIIs who have already invested in India are showing signs of wobbly knees.

Add worries about oil prices, political stability, VAT and possible fiscal slippages this year, and you can visualise Cassandras emerging from the woodwork.

I believe that the main worries for market players (including FIIs) lie outside India, and that is precisely the reason to stay invested in India. Global fund managers tend to invest in US treasuries precisely because they think the US economy is politically more stable than elsewhere.

At this juncture, this sentiment is equally true for the Indian economy. India is safer for global and Indian money than almost any place else in the world.

Let's start with basics. Where should anyone put his hard-earned money? The answer ought to be: where there is growth and stability. There is growth in China, India and the US, apart from sundry smaller nations in south-east Asia, eastern Europe, Russia and Latin America.

But if you are talking about the long-term safety of your money, the global investor should be putting his money not only in fast-growing economies, but in areas where the quality of growth is significantly better. Between India, China and the US, which one fits the bill best?

Currently, the quality of growth in both the US and China is suspect. The US has, for decades, been living on borrowed money, as evidenced by its burgeoning current account and budgetary deficits.

The US economy can afford to live beyond its means because the world has been willing to invest endlessly in US debt. No default is ever expected since the US settles its bills in dollars. It can print its way out of trouble.

But in recent months, many central banks have begun having second thoughts about putting all their eggs in the dollar basket. This is one reason for the rise of the euro.

The movement against the dollar hasn't achieved critical mass yet, but it will happen over the next few years. The smart guys should be moving into non-dollar assets now -- not when the panic hits. This means India.

The explanation for China's growth miracle is simple: it is doing precisely what the Soviet Union and the Asian tigers did earlier to achieve record growth.

China is constantly increasing inputs of capital so that the resultant investment binge creates growth, incomes, jobs and consumption.

This is fine as long as the capital used is earning a decent return and results in higher and higher productivity. But it can be downright dangerous if you are using more and more capital to produce diminishing returns.

In China, this may well be the case. Between 1991 and 1995, China's incremental capital-output ratio was a reasonable 3.4. In the next five years, it rose to 4.5.

Today, it is a high 5.1. Meaning, China needs over five units of capital for every additional unit of output for sustaining its high growth rate. In their high growth decades, Japan, Korea and Taiwan used significantly less capital, with ICORs in the 2.7-3.2 range.

It is widely assumed that China's high growth is largely the result of huge FDI.

The huge FDI is fact, but as a driver of investment, it is politically-directed domestic borrowing that is financing all kinds of capital investment in China. Put another way, China is printing money to boost investment and growth.

Seen another way, the US and China are mirror images of each other's follies. One borrows and the other lends. One manufactures and the other buys. No problem with this arrangement as long as major investors don't stop to look underneath. Once they do, both China and the US will see significant turmoil.

India, with its less politically-determined growth rates and more efficient financial system, stands as a safer haven than the world's other two growth economies.

If I were an FII with its head screwed on right, India is where I would be overweight for the next half-decade at least.