Thank you America: PM Modi hard sells India but will the funds pour in?
With Prime Minsiter Narendra Modi hard-selling India to US businessmen, the general sentiment is that the country is back on the global investment radar even as the Congress party in India has termed Modi’s visit as damp squib.
Unlike other high-profile foreign visits by heads of state, Modi’s trip did not result in any big-bang investment pacts or business deals. However it did clear the air between the two countries with Obama and Modi promising a ‘strategic partnership model’ for the world.
But the key takeaway from Modi’s US visit is that he has successfully managed to portray India as the next, hot investment destination and as a massive market for US companies to invest in, as purchasing power rises in India. In other words, he has managed to woo everyone— from Obama to big business and off course the NRIs.
The bottom line is this: The growth story is no longer just about China, India will play a big part too, which is why Modi sought to ease US apprehensions about India’s tax regime and provided more clarity on foreign direct investment.
In a joint op-ed published in The Washington Post on Tuesday, Obama and Modi wrote, “The true potential of our relationship has yet to be fully realized. The advent of a new government in India is a natural opportunity to broaden and deepen our relationship.”They added: “While India benefits from the growth generated by US investment and technical partnerships, the United States benefits from a stronger, more prosperous India.”
While Obama was impressed by Modi’s interest in addressing poverty and growing India’s economy, as well as his determination that India should help bring about peace and global security, Ajay Banga, chairman of the US India Business Council, who is also the CEO of MasterCard, said “The best days of US-India relations are coming.”
He expressed confidence that India-US trade can grow five times from the current $100 billion. “The real thing that he has got to do is restore trust in the way people perceive India as an investor destination. For that you need predictability and consistency of policy,” Banga told CNBC-TV18.
Meanwhile, US Chamber of Commerce President Tom Donohue welcomed PM Modi’s commitment to replace “the red tape with the red carpet” and the government’s commitment to labour and tax reforms.
During his breakfast meeting in New York with 11 CEOs, including those of Google, Citigroup, Pepsico, Blackrock, IBM and Boeing, Modi invited US business leaders to come to India and join the “Make in India” campaign pitching it as a win-win situation, given that India is moving ahead with great speed. Following this, BlackRock, a global investment management firm, assured the prime minister that the firm could facilitate investments worth over $6 billion into the country by early next year, said an ET report.
BlackRock has even offered to work with the Indian government and host a major investment conference in India early next year, which is likely to become an annual affair.
According to a report in the Economic Times, CEOs present during the meeting were keen on investing India’s food chain and agriculture-related sectors, while others wanted to pump in money into India’s infra and energy sectors which is why they sought details on the way forward after the Supreme Court’s judgement on coal block allocations.
Modi, it seems, has allayed those concerns and assured investors that he means business . He said he would convert the Supreme Court judgement on coal blocks into an “opportunity to move forward and clean up the past”.
Mahindra Group chairman Anand Mahindra told CNBC-TV18 that all investors are looking for, is a commitment or an unequivocal promise from Modi that instances of retrospective taxation won’t happen in the future. Investors are not looking for immediate repeal of retro tax, he added.
He added that there was never a doubt that India has potential, but it was more about whether there is a catalyst or a conductor. “They believe Modi is the right conductor,” Mahindra told CNBC-TV18 but cautioned that there was still some apprehension over whether the Prime Minister would be able to deliver. “He (Modi) set very high expectations while he is here and the downside of high expectations is we have to deliver”, he said.
Terming Modi’s meeting with the top business leaders in the US as a ‘major game changer’, the Federation of Indian Chambers of Commerce and Industry ( FICCI) said that the Prime Minister’s move was a real strong signal to bring back the business confidence for major companies around the world.
“Yes, there are issues like bilateral investment treaty, intellectual property rights, wanting India to open its retail sector for the foreign direct investment and India’s tough position in the WTO talks on the issue of farmers’ security vis-a-vis the trade facilitation, the American corporations see big opportunity in the Indian economy ready to tread fast once again,” says an assessment by ASSOCHAM’s US office.
The research paper is of the view that US corporate leaders believe that being the single-largest party in the Parliament, the BJP government has an advantage over previous governments, and hence expects Modi to deliver results.
But India ranks 134 among 189 economies in’Ease of Doing Business’ index released by the World Bank.
Add to that India’s power shortage and shoddy infrastructure. Fulfilling the promise of doing away with archaic laws and running from pillar to poll to gets approvals will be a challenge and will take an equal commitment from stodgy state governments. As this Reuters Breaking View column points out, “Getting them to change their tune will be the real test of Modi’s business-friendly riff.”