Over the past three years, India has seen something akin to a minor revolution in terms of its attractiveness to foreign investment. This has culminated in four current truths about the Indian market that were not so easily apparent five years ago.
Firstly, the Indian economy supported by a growing middle-class consumer base and as a direct result of sensible and pragmatic reform put in place over the past decade is now a huge and sustainable market economy for foreign investors to sell to. The banking system is stable, India possesses relatively little foreign debt, and none of the specific debt that has afflicted much of the global economy over the past 18 months. Indian exposure to the sub-prime mortgage crisis has been minimal.
India’s middle class is estimated at 250 million people – little wonder that brands such as Porsche and Ferrari are now sold in the country and brands such as Jaguar are now Indian owned. Even at the lower level opportunities also exist, in India Levi’s jeans are considered a status symbol. While poverty remains an issue in many rural areas, India’s current economic models and rural development policy indicate that hundreds of millions will be lifted out of poverty within the next 10-20 years, further creating demand.
Secondly, this process of development and reform has been given a major boost politically. India has had to deal with two decades of coalition governments, with the country’s infamous democracy unable to decide which party should have an overall mandate to govern. The result has been a modern India derided for the shortcomings of its democracy and of a government paralyzed to do any meaningful reform due to the constant horse trading needed to get any legislation through. Legislation that has been passed have so often been watered down by minority views with vested interests that impact has been minimal.
Over the same period, China has stood up, and with a one party state, been able to enact real progress. China is often now held up as a model of optimum governance, whereas India is typically depicted as politically backward, moribund and argumentative. While this may have been true, such pictures are now outdated. India has a government now that can effectively manage reform and get much needed reform passed through the legislative bodies. The Congress Party won a decisive victory in Indian general elections a year ago, and the party has wasted no time in seizing the opportunity to radically reform Indian competitiveness and commerce. India now has strong political leadership with a business friendly government open to transparency and reform. This is expected to continue.
Third, reform involves removing trade barriers, opening up to foreign competition in domestic markets and getting government out of business. While some progress still needs to be made in key politically hot areas such as insurance and mass retail, generally India is open to foreign investment, and is becoming more so. Such reforms will continue and change, and this is to the benefit of early players who can enter the Indian market and steal a march on their rivals.
Lastly, tremendous opportunities exist at this very moment for foreign investors to get actively involved with. However, these will not stay incumbent for long. One of the points always pointed out to me is the legendary state of disrepair and backwardness of much of India’s infrastructure. Many compare it to the vastly superior infrastructure available in China. Yet the problem is also the opportunity. Just as China’s infrastructure was backward twenty years ago – I recall donkeys and carts along the then main, two lane Beijing airport highway – so India will fix its infrastructure problems too.
As we noted in our previous issue of India Briefing “Investing In India’s Public-Private Partnerships,” the government is making finance and industries available for foreign investment and participation to assist with the redevelopment of the country. For a nation the size of India, the opportunities are staggering. India’s infrastructure problems are not just a problem, they are now the bedrock of reform and a rare chance for multinational businesses to enter into a market that is going to deliver, in the words of Prime Minister Manmohan Singh, “sustained 10 percent growth for the next 25 years.”
Meanwhile, in terms of global opportunities, India offers two faces. The west coast, and the port city of Mumbai, overlooks the Middle East, Africa, and Europe. The east coast, and the main port of Chennai, overlooks Thailand, South-East Asia, Singapore, China, Japan, Australia and to the U.S. west coast. With easy access to these markets, in addition to a wealthy and increasing middle class population, the India of today is strongly reminiscent of China in terms of providing both a domestic market and an operational base for exports.
India, quite simply, is in duality a market and an opportunity for growth that foreign investors simply cannot afford to overlook if they want to achieve sustainable growth. As domestic markets in Europe and the United States slow down, India is the place to be for foreign investors looking to obtain high growth for the next decade and beyond, and may even surpass China in its ability to do so.
This article was written by Chris Devonshire-Ellis for the India business news website, India-Briefing.com. The site is contributed to by Dezan Shira & Associates who maintain business advisors and accountants in Mumbai and other Indian cities. Dezan Shira also write for the Vietnam business news website, Vietnam-Briefing.com.
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Top environmental and climate negotiators for China and India instructed the United Nations Framework Convention on Climate Change (UNFCCC) on Tuesday to include them amongst the nearly 200 countries listed at the top of the Copenhagen Accord.
The accord, a three-page nonbinding statement, was the only thing to come out of the failed attempt at world government that was the Copenhagen Summit this past December.
The deal underlines climate change as one of the great challenges of our time and calls for limiting the rise in global temperature to below two degrees Celsius. It also asks developed countries to raise funds of US$30 billion for new and additional resources by 2012 and for the world to raise US$100 billion a year by 2020 to help developing countries mitigate carbon emissions.
China and India are the last two large economies to attach their name to the deal, but are among the most important due to the role that they are forecast to play as they continue to fuel their growth in the coming years.
“After careful consideration, India has agreed to such a listing,” India’s Environmental Minister Jairam Ramesh told Parliament on Tuesday, according to Reuters. “We believe that our decision to be listed reflects the role India played in giving shape to the Copenhagen Accord. This will strengthen our negotiating position on climate change.”
In a similar move yesterday, Beijing’s Su Wei sent a one-sentence statement to the UNFCCC confirming China’s desire to be named among the countries that “take note of” the Copenhagen Accord.
“I am writing to confirm that the Secretariat can proceed to include China in the list of Parties included in the chapeau of the Copenhagen Accord,” it read.
While the actual ramifications of China and India signing on to the deal are minimal due to the difficulty of establish a legally binding agreement, it does give the Copenhagen Accord a bit more credibility and could help to put everyone on the same page for real progress being made in Mexico in 2010 or, more likely, South Africa in 2011.
This article was written by Christian Fleming for 2point6billion.com, a daily news source of interest to any businesses undertaking foreign direct investment in Asia. Chris also is the founding member of China business advisory firm, Dezan Shira & Associates, and often writes for the China business news website, china-Briefing.com.
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