Investment commission as a change agent

Sometimes apparently simple tasks may turn out to be the most challenging ones. The newly-formed investment commission has been charged with the responsibility of wooing private investors, both domestic and foreign, to raise investments in the economy. The objective is akin to marketing India as an investment destination and the team would be ably led by some of the biggest brand-builders: Ratan Tata, Deepak Parekh and Ashok Ganguly. However, long-term success of any marketing team is predicated on how they can get those who make the product to adapt it to meet customer needs.

Some success for the new team could come easy. First, there is much greater awareness of the product now than earlier. India has been the flavour of the year for the domestic and foreign investor community and is consuming more column inches and airtime in global business media than it ever did before. Second, the conjuncture for a marketing blitz is right. The economy is reviving, corporate profitability has looked up, investment climate has improved and FIIs are bullish on the potential of the Indian stockmarket. What is more, India has once again convincingly demonstrated to the world that its democratic processes are mature enough to sustain a stable political climate. While a change in government could raise questions about the future course of policy, such apprehensions are quickly set at rest as continuity asserts itself.

In some sectors, focused marketing could add to the momentum already underway and there could be easy pickings. Thus IT and BPO, telecom, automobiles, auto components, R&D, pharma, biotech, tourism and textiles could be offered as a range of options offering potential for growth and returns. Presumably, the commission would begin by building databases of untapped consumers in each of these areas who have not tested the Indian market and pick at least the bigger ones to convince them of the opportunity that awaits them. In some segments such as civil aviation and SEZs, marketing would have to await the announcement of the new aviation policy and the SEZ Bill that are round the corner. But infrastructure that apparently tops the commission?s agenda could be a difficult nut to crack.

Investment in infrastructure remains low not necessarily because of lack of investors or shortage of capital. Today, the main constraint is posed by distortions in the enabling framework that make the revenue model available to the private investor unviable. If the revenue model is set right, foreign and Indian private capital would pour in to meet the huge demand for infrastructure. The expression of interest shown by a number of big local and foreign investors in the Delhi and Mumbai airport modernisation projects is proof that the constraint is not capital but policy. Before the government announced its move to privatise airports and the equity structure and terms of operation, no investment commission could have mobilised investors to look at these airports. Likewise, in states that continue to sell free power, it would be difficult for the new body to enthuse investors. Indeed, being investors themselves, the business leaders that lead the commission are unlikely to be enthused themselves!

This is the nub of it. Unless the commission can catalyse changes in the product they sell, the success of their endeavour would remain patchy. Therefore, the commission would have to be backed by pro-active public policy led by the cabinet and PMO. The agenda for policy change needed across sectors to woo investors is well-known and the commission can get off to a start by merely highlighting key points for implementation by government. Unfortunately, here the marketing arm would have to deal with multiple agencies at the central and state levels. Just like investors approached by the commission would request for a single-window clearance for their projects, the investment commission too deserves one nodal point that can promise to expedite policy changes across-the-board so that the product they market can be made to suit the needs of the investors (consumers).

To meet this objective, the commission could consider entering into product-specific MoUs with both central and state governments that make it clear that the selling of the product would follow and not precede suitable modifications and adaptations desired by the consumer. For example, if the government seeks investment in ground handling services in airports, the MoU would seek clarity on civil aviation policy. Or if a state government seeks investment in power, the MoU would seek pricing and other policy changes. If a state government wants investments in tourism, real estate, housing and township development, the MoU would define policies on stamp duty, land use, time taken for environment and other clearances, fix penalties for not meeting deadlines etc. Once in place, these MoUs would make it clear that if the commission fails to mobilise investments in a particular sector, whether the cause for it lies with bad marketing or a faulty product.

Seen this way, the commission could be a huge change agent and can go a long way towards transforming the investment landscape by touching every stakeholder in the matrix that determines investments. In particular, the MoUs with state governments can be instruments that push state-level reforms. The commission should consider ranking states according to their attractiveness to investors. This rating could galvanise states into competing with each other and also sensitise their bureaucracies and political leadership about the linkages between governance, public policy and investments. The advantage the commission enjoys is that it is led by businessmen who command respect and credibility. All three of them must leverage their credentials to link marketing of India with catalysing change across-the-board.

The author is an advisor to Ficci. These are his personal views