Economic Highlight

3 October 2014, New Delhi

US Investments

MODI HARD SELLS INDIA

By Shivaji Sarkar

Prime Minister Narendra Modi means business. That is what the US visit was all about. He did not conceal that either as he told the packed crowd of American corporate leaders. And he was candid. He stated: “I am business-minded. I know a businessman is not a donor. He’s not here for charity. A businessman has to make his profits. He must get a return for his investment. I’m in favour of that”. Indeed, Modi pledged the ‘red carpet’ instead of ‘red tape’ to get their investment as India has a long way to go.

He also demonstrated qualities of a diplomat, who could talk on an even keel with US President Barack Obama. The latter’s decision to have a interlocution with Modi not on one but two occasions and his gesture of an impromptu visit to the Martin Luther King memorial was significant. It came soon after Modi spoke of G-All and not G-One at the United Nations General Assembly.

Would these steps mean business for India? Would it change the biz confidence in the country? There are positive signs. Despite the statistics of development not moving up, it has given countrymen, both in India and abroad, a rare confidence. The nation is abuzz that they have got a person, who can lead them. The way he engaged Obama was in sharp contrast to what the nation looked at disdainfully when the US President put his arms around an elderly Indian Prime Minister a few years back.

For Modi it was just not Indo-US business. It was beyond and much more. The US showed that it took Modi and certainly India seriously on terrorism in Pakistan and the Chinese belligerence in South China Sea, where Indian oil interests are involved-- the two issues raised by Modi at the UNGA. The US imposed sanctions on Pak-based terror outfits Harkat-ul-Mujahideen and Lashkar-e-Toiba, which target India.

Further collaboration on Afghanistan and anti-India Pakistan-supported terrorism is likely. National Security Advisor Ajit Doval has stayed back to work that out. The move is an initiative to ensure not only safety of the people but also of Indian investments.

The US has also shown willingness to develop three smart cities-- Hindu pilgrim centre Allahabad, Sufi pilgrim shrine Ajmer and the pride of the south, Vijaywada. It also wants to partner on digital India initiative, set up infrastructure collaborations, extend an Indo-Pacific economic corridor to Myanmar, Southeast Asia and identify critical ports, rail, aviation, inter-modal infra projects. All this means possibilities of immense investments.

Modi’s various moves and style of governance got good support from RSS chief Mohan Bhagwat during his significant annual Vijaya Dashmi address. But there was a bit of caution too. Bhagwat wants the nation to cut down on imports, increase exports and be self-reliant. It was a sobering advice on the nation having a deluge of foreign investment. He also gave a call to virtually boycott Chinese imports, obviously to boost Indian manufacturing.

Given the national needs, the Government may have to tailor its investment policies. Modi is keen and appears certain to change the face of the country by creating a manufacturing hub. He now has to possibly balance it with FDI and indigenous investment. His cajoling of the non-resident Indians in New York is a clever ploy to encourage PIO (People of Indian Origin) investments. Much of it remains in the country and not repatriated.

Modi’s promise to both PIOs and US corporate leaders of smoothening the Indian system is essential to create the business climate. In the past, Indian leaders have many a time made promises of a single-window clearance, but investors found themselves ultimately in a maze of rules. It was not long when the State of Uttar Pradesh had signed, at least thrice, in the past 15 years, MoUs with Indian and foreign investors to the tune of Rs 54,000 crore, but little came of it.

The country no more wants promises but a clear road to investment. Would the US corporate invest in this country? At least some like the General Motors, who have invested to build an automobile hub, are happy. Among various areas, it is expected that India may have large US investments in the oil and defence sectors. Indian defence manufacturing requires wings and with American technology and production in the country, though yet to be finalized, it may finally equip India with a rare opportunity to export arms and weapons. Such investment is likely to be in billions of dollars. Likewise, the US proposal to set up a defence university should be seen having greater import than mere investment.

Additionally, the joint mission for a better understanding of climate change impacts is likely to pave a closer cooperation. India has been having its first climate studies with the US on Monex – monsoon experiment – since 1960s. It not only unraveled many secrets on monsoon movement but has helped reorganize the Indian meteorological department, which now does accurate forecasts. Besides, the world’s largest 30 Meter Telescope Project (TMT) is significant. While such missions do not bring in large investments, these do pave the way for long-term business.

Also, the proposed MoU between US Exim Bank and the Indian renewable energy department may ensure $1 billion funding for import of made-in-America, a favourite Obama mission, of renewable energy goods and services in India. However, it is unknown yet whether technology would also be available. India would have to match it with strong non-grid power research system to free the people from large corporate oriented high-cost power system.

As of now it’s not easy to fathom the extent of investments, though the intent is deep. Fund managers from India and abroad expect improving sentiments and impressive returns from Indian markets to help attract billions of dollars flowing into the country's asset management industry. For example, Sundip Sikka, CEO, Reliance Capital Asset Management CEO has stated that his meetings with many investors suggest they are bullish on India and are willing to invest.

India, however, has a lot to do. It has the capacity to emerge from the morass, provided it ensures an easier legal and tax framework and better conditions for the working class. The aim of Modi is antyodaya but it requires labour laws that can ensure an honorable treatment to the working class. If the developments go in the intended direction, it might lead to a continuous flow of investment. At least one person will have his fingers crossed. ---INFA

(Copyright, India News & Feature Alliance)