India’s reforms will take time to pay off
Ashish Jakhanwala, the co-founder of Samhi, a hotel asset company based in Gurgaon, shares his views on India’s foreign investment environment.
Is India turning a corner as the new government seems to be taking steps to improve the country’s image?
India was always a high-potential destination due to the strength of its democratic institutions and demographics, but suffered immensely due to poor governance which was driven only by politics with little or no respect for policy. I also believe that India’s track record in marketing its true potential was dismal. In prime minister [Narendra] Modi, the country has found a champion and a statesman who can communicate India’s true potential to the outside world.
What needs to be done for India to inspire confidence among overseas companies?
Cautious optimism, which a lot of companies exhibit, isn’t applicable only to India. After the global economic crisis, most smart investors have a heightened sense of risk-profiling, and that is applicable to India as well. However, specific to India, investors are currently evaluating their options, strategies and plans and will take time to move in.
How long would it take to develop a favourable image?
My first reaction to the government’s style is that they are high on content and low on headline value. While this may disappoint the trade analysts who are used to breaking news every hour, to investors and businesses it is the content that will drive long-term returns. Low-level items such as better functioning of the public sector and higher accountability in public offices may not make it to global headlines, but these are the leakages that caused India more harm than many large macro events. These initiatives will take long time but will leave a long-lasting impact on India’s attractiveness as an investment destination.
What challenges still remain?
The state-centre relationship will be key a bottleneck to drive reforms at ground level. While BJP is making strong inroads across states in India, it needs to learn to respect states governed by opposing parties and work with them in an unbiased manner. A key catalyst for growth is rationalisation of high interest rates and with high inflation the central bank has maintained a hawkish approach. This stand-off needs to be addressed sooner rather than later, or else it will negate a lot of good policy work and the positive environment. Most businesses may get support at a high level but they have to eventually operate under a set of archaic laws and regulations. Until these are amended to reflect today’s needs, a lot of pain will continue.
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Published: December 6, 2014 04:00 AM