Modi needs to remove these roadblocks for companies to actually invest and make in India | INTERVIEW

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Updated: May 18, 2020 12:14 PM

The ease of doing business remains a challenge in terms of implementation at the state and local level.

US-India Partnership, ease of doing business, industrial pociy, labour laws, foreign companies in india, FDIThe rules governing personal data protection, e-commerce guidelines, and data localization will also deter investors if industry consultations are not taken into account.

As the Narendra Modi’s government and various state governments pull up socks to attract more foreign companies to invest in India, especially those who are thinking to shift their base out of China, key roadblocks in the country may still hinder such investments. “The ease of doing business remains a challenge in terms of implementation at the state and local level,” Mukesh Aghi, CEO & President, US-India Strategic Partnership Forum (USISPF), told Samrat Sharma of Financial Express Online in an interview. Arbitrary policy changes will not help attract foreign investments, Mukesh Aghi added. The rules governing personal data protection, e-commerce guidelines, and data localization will also deter investors if industry consultations are not taken into account, he further added. 

Here are the excerpts from the interview.

How industry-friendly do you find India’s business policies and conditions?

I would say India’s industrial policies are somewhere in the “middle of the road.” While messaging and investor-friendly announcements come directly from the highest levels of the government, and policies are well-intentioned and welcoming for foreign multinationals, there is often a mismatch at the implementation level. If India wants to emerge as a key player in the post-Covid era, a few pieces need to fall into place. 

First, companies have been exploring the opportunity to adopt a “China plus one” strategy, which may accelerate as a result of biosecurity concerns. On the other hand, countries – including the US – are also talking about reshoring supply chains. It is a binding situation on businesses already facing uncertainties due to the pandemic. This provides India with a window of opportunity to bring immediate strategic investments into the country in sectors such as pharma and hi-tech manufacturing, where it has a competitive advantage vis a vis other countries like Bangladesh and Vietnam. On the trade policy front, it would be a great advantage to have a US – India trade deal.

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How much chance does India have to attract US companies looking to shift their base out of China? 

I believe with a global rebalance in play, India has a great competitive advantage when it comes to attracting foreign investors. It has the right combination of a skilled and young demographic, a population with rising purchasing power, and an economy that has embraced digitization. 

Of course, these factors are not enough to bring manufacturing into the country. India will need to enact a whole slew of reforms— not just land and labor, but also to ensure predictability and transparency in policy-making, and to maintain the sanctity of contracts, showing foreign investors that the rules are the same for everyone, instead of favoring one group or entity. There is competition from other Asian economies now, not just China. Other emerging economies, such as Brazil, have received up to $75 billion in FDI, while India received about $45 billion. There is clearly scope to do more.

Also Read: FM Sitharaman paves way for PSU mergers, privatisation; opens all sector opportunities for private cos

What are the major roadblocks in India that, if corrected, can attract global companies’ investment?

As previously mentioned, the ease of doing business remains a challenge in terms of implementation at the state and local level. States are stepping up and doing more. However, the rules governing personal data protection, e-commerce guidelines, and data localization will deter investors if industry consultations are not taken into account. 

How much will the latest changes in labor laws help to lure foreign companies?

Arbitrary policy changes will not help attract foreign investments. Any policy change has to be viewed and sustained from a long-term perspective. We have a crisis at the moment, but policymakers cannot afford to make sudden decisions only to reverse them after the crisis passes.

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