Modi govt.: next six months crucial for investment

November 27, 2014 02:20 am | Updated December 04, 2021 11:36 pm IST - New Delhi:

Sheikh Hamad Bin Naseer Al-Thani, a Qatar royal, was on a recce of India, and returned impressed last week, unlike his first visit two years ago.

“Prime Minister Modi has made a difference in the last six months,” he said, talking to The Hindu about his plans to invest in India, in smart city development, solar power and infrastructure. “By March I hope to have an MoU with Andhra Pradesh government for developing a smart city, and if things go well, I may invest in the range of $ 10 billion in coming years.”

Investor sentiment is strongly in favour of India, but the next six months will be the most crucial in Modi government’s tenure from an investment point of view, feel investors, international consultants and diplomats of investing countries interviewed by The Hindu on the big push for manufacturing sector that marked the first six months. On November 26, the Modi government completes six months in office.

Richard Fenning, CEO of Control Risks, a London-based consultancy, says there has been a 150 per cent increase in due diligence services sought by potential investors in India since Mr. Modi came to power, “a clear indicator of serious interest in the country.”

“But the final investment decisions will depend on what happens in the next six months. That is the window that the government has to act on its intentions. After one year in government, the political capital will begin to deplete and sentiments will turn,” Mr. Fenning, who is visiting India, told The Hindu .

PMO the bottleneck

“More than policies and regulations, it is the procedural hurdles that still make investors sceptical,” said a senior official of the Singapore Foreign Ministry, and here, the last six months have not been particularly encouraging. “There used to be several bottlenecks in the Indian system earlier. Now there is one, really difficult bottleneck, which is the Prime Minister’s Office,” the official said, adding that no Minister or bureaucrat wanted to act unless they are sure of what the Prime Minister wants. Singapore had been a major source of investment in India.

Mr. Fenning pointed out the centralised nature of decision making as a potential turn-off for investors. “If in the next six months, the Prime Minister is still surrounded by the same set of people who are there because they all agree with him, it will be a turn off. He needs to build a coalition of various interests.”

The authoritative ways of Mr. Modi’s functioning, however, is reassuring for a lot of investors right now, and is the main reason for the positive sentiments currently, said Mr. Fenning. “Many investors actually feel relieved that someone who has the authority and mandate is in charge,” he said, adding a caveat. “But a country cannot be dependent on one person.”

Tax regime and procedural ease would be the two criteria that that international investment community would judge Mr. Modi by in the next six months, Mr. Fenning said. A Japanese diplomat echoed the same view. “The big 1,000 Japanese companies are already in India. The new push can come only if we can bring around 9,000 smaller companies to India. The problem is that they don’t have the wherewithal to deal with the Indian system, unlike the big ones.”

He pointed that Japanese investors were increasingly wary of China, and wanted to divert investment to India, but procedural bottlenecks are scary.

“The first six months were driven on sentiments. The next six months will decide the future Modi’s development model,” Mr. Fenning said.

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