Until recently, India was one of the fastest growing economies in the world. In spite of the recent setback with the pandemic, our country remains an appealing destination for investment for both foreign as well as domestic markets. Nevertheless, making turning this possibility into a full blown reality has some challenges. Prime Minister Narendra Modi’s strategic response to the crisis has been targeted incentives, subsidies and fiscal spending. In my opinion, while this is a start, more needs to be done to make India the most preferred place to invest.
So what is it that could make India a preferred investment destination?
Progressive liberalization and creative development initiatives
The FDI policy of India is considered to be among the most liberal among the emerging countries. However, I feel that if India is to take its rightful place in the world, we need to shed these limiting categories and take a big picture view. Over the years, our nation has become more and more hospitable to FDI. But regulatory limitations are still a deterrence to a transformative influx of investment. There is no question that, in comparison to the past, some red tape has been eliminated. However, once again, should we be satisfied with comparisons to other models that were inadequate? On the contrary, I feel India should aspire to meeting and exceeding the best business friendly ecosystems in the world.
Initiatives like “AtmaNirbhar Bharat” are inspirational in their scope. And, truth be told, the latest figures from independent assessors, relating to the growth in the MSME sector are heartening. Despite the pandemic, the natural entrepreneurial spirit of Indians has come to the fore, and the bump in the very small enterprises segment reflects well on the nationwide initiatives to invigorate such micro-ventures. Coming back to the notion of India as an investment destination for international and national capital, I feel the more important issue is to address issues in Banking, Dispute Resolution, and transparency of bureaucratic mechanisms. It is through such changes that initiatives like Make in India or Startup India, will have the ideal environment for growth, and produce the desired results.
A demographic that is young and skilled, in a rapidly growing market
India is home to the world’s largest youth population, which in turn makes for a working population that can stay productive for a long time. For companies and newly-setup industries, there is a ready-made talent pool of skilled professionals available in our country. Also, it is no secret that India has a cheaper labour force in comparison to many other Asian countries. In addition to this young population, India’s fast growing purchasing power, is the reason why retail giants like Walmart and Amazon made multi-billion dollar investments in India. The vast middle class population and fast growing market with a never ending demand for consumer goods is a big lure for companies looking to invest.
So how well are we leveraging our strengths?
After an abysmal first quarter under the influence of the pandemic, the very next quarter has shown a strong surge. The fundamentals appear robust and I’m happy to see that all the primary deficits are in control and falling fast. This is a promising state to be in, but we now need to heavily incentivize international firms to move to India, and this is where I find that things are somewhat lacking. Even though India has achieved global competitiveness in a lot of spheres, it still falls short in the area of infrastructure. Once again, this is an area in which much has been done, but there is still a sense among the global investment community that more is needed. Logistical costs are a big concern, and they can easily eat into the positives that a country offers investors.
In my view, we are at a critical moment in history, with international capital desperately looking for growth avenues. The world is keen to find the ideal investment versus returns scenario, for a post pandemic jump start. India cannot afford to present anything less than a progressive, business friendly and impediment free case, for the global business community.
