PM Narendra Modi pitched India as the “only destination” to US investors at a global business forum in New York, saying “if there is any gap anywhere, I will personally act as a bridge”. He also held a closed-door meeting with the CEOs of leading US companies to harness investment opportunities in India.
ThePrint asks: Modi meets US CEOs: Is India still an attractive investment destination in 2019?
India’s image of an attractive investment destination has spiked in recent weeks due to major reforms
Director General, Confederation of Indian Industry (CII)
Prime Minister Narendra Modi capitalised on a great economic opportunity when he pitched India as the investment hub for American investors. India’s attractiveness as an investment destination has spiked in recent weeks with major reforms and development projects being announced. The slash in the corporate tax rate to 22 per cent for companies not availing tax exemptions is a big draw for the investors. Even more attractive is the reduction in corporate tax for new manufacturing companies to 15 per cent, which promises to attract investments aimed at global and domestic markets.
This is to be seen in the light of downtrend in the interest rate cycle initiated by the Reserve Bank of India, reforms on ease of doing business, and stable macroeconomic indicators such as inflation and fiscal deficit. In addition, the Modi government has announced its intention to spend about $1.3 trillion on infrastructure. At the same time, procedural issues related to GST are constantly being addressed.
India converges strong entrepreneurship skills and technology talent with large international markets. At a business forum in the US Wednesday, PM Modi mentioned democracy, demography, demand, and decisiveness as India’s advantages. For US CEOs, impacted by trade conflagration with China and rising wages in emerging markets, there can be no better place than India to invest in at this time.
To be an attractive investment destination, India needs reforms at both central and state level
Former Research Associate, Centre for Strategic and International Studies, Washington DC
Prime Minister Narendra Modi Wednesday invited investors at the Bloomberg Global Business Forum to “come to India” and that “India is waiting for you.” Early into its second term, the Modi government has already taken a few steps to maintain India’s attractiveness as an investment destination, such as reducing the corporate tax rate and relaxing restrictions on foreign direct investment in contract manufacturing, coal operations, insurance intermediaries, and digital media news sectors.
However, additional domestic reforms can help attract more foreign investment, particularly in manufacturing as global investors look beyond China. As one report in the Financial Times put it, “India today pulls in a pitiful 0.6 per cent of GDP in manufacturing FDI. In the early 2000s, when China was at a similar stage of development, it managed 2.5 per cent.”
Undertaking crucial reforms at the central level, such as removing restrictions on land acquisition and easing the requirement for government permissions on hiring labour can ensure India capitalises on the investors’ excitement. At the state level, reinvigorating competitive federalism to ensure governments simplify the process for business clearances and improving access to electricity can also generate a pull-factor for new investment.
Given the current global headwinds, India has a unique opportunity to cement itself as an investor favourite. To do so, however, India should look to move quickly on such an ambitious and broad-based reform agenda.
There’s ample scope for investment in India’s defence & aviation sectors
Director, Defence & Aerospace for USISPF
There is ample scope for foreign investment in India’s defence sector. India’s armed forces are running short of equipment. More fighters are required for both the Air Force and the Navy. The Indian Army has been using around half-a-century-old BMP combat vehicles that desperately need to be upgraded or replaced. The Army has also projected a requirement of 1,770 tanks. Other than submarines, Indian Navy is also short of both utility and multi-role helicopters.
In the last five years, India has been the world’s biggest importer of defence equipment, except last year, which shows that there is a huge demand in the defence sector.
India wants to be self-reliant when it comes to defence manufacturing. It is a very lucrative proposition for foreign investors to come to India now. Raw material and labour are much cheaper here, and that’s why the total cost of manufacturing in India is less than anywhere else.
India’s aerospace sector has been clocking double digit growth over the last five years. There is abundant scope for building infrastructure for airfields. Old airfields are undergoing expansion and modernisation while several new airfields are also coming up under the Modi government’s UDAN scheme.
There are also opportunities for investment in the security equipment sector. With advancements in technology, Indian airports will need constant upgrading – like admission through facial recognition etc.
Important to have supporting infrastructure to cater to requirements of projected economic growth
Director General CEO, Amcham India
India is in a unique position to play an important role in the global value chain, as the bilateral relationship with the US expands to cover the Indo Pacific. Technology has been one of the key drivers of India-US economic partnership, and India’s digital transformation is a potential for greater collaboration across sectors.
One great step has been improving the ease of doing business with greater transparency creating a better business environment in the country. The recent announcement of reduction in corporate tax rate will boost investor sentiment.
It is important to have supporting infrastructure to cater to the requirements of projected economic growth and better global positioning. We need to supplement our capacity for cargo handling, exports, and last-mile connectivity to bolster seamless exports. The tax reforms have to be prospective and cannot be retrospective.
The environment in India is great for investment with the country positioning itself as a leading player in the global economy.
With Indian telcos pressing for delay in 5G roll-out, US investors have a rare, lucrative opportunity
President, The Imagindia Institute, expert on geopolitics and international business
Investing in research and development and production of 5G hardware in India is a rare and lucrative opportunity for US investors right now. Since many telcos in India are pressing for a delay in roll-out of 5G, a joint venture between the US and India could be developed to roll out their own products by the time trials are invited.
It will also serve the geopolitical interests of both the countries. However, it must be kept in mind that this plan will succeed only if the ‘ticket size’ is large, and the investments are long-term.
When US President Donald Trump and PM Narendra Modi had held talks on the sidelines of the G20 summit in Osaka in June, the main topic was 5G communications, including the prospects of a US-India collaboration on the technology. Since then, both leaders have had meetings in Biarritz and New York. One can expect that some progress must have been made on how to fend-off the Huawei challenge.
One smart way would be to encourage large American foreign direct investors to conduct joint research with their Indian counterparts and manufacture 5G hardware for the Indian, US and other international markets. Of course, any US company and its Indian business partner will have to compete with China’s Huawei and the European companies, but they could thrive well if they play their cards right.
By Taran Deol, journalist at ThePrint