Prime Minister Narendra Modi said he was confident that as far as investors were concerned, India was the best destination in the world, courtesy its skilled human resources and rapidly improving infrastructure. “The vision for the next five years is to have investment-led growth. We are targeting Rs 100-lakh crore worth of investment in the coming five years, Modi told during an interview with The Economic Times.
India has been making waves in terms of improving business competitiveness and ease of doing business in recent times. In May, India emerged the world’s 43rd most competitive economy in the 2019 edition of the IMD World Competitiveness Rankings. Last October, India jumped 23 places to rank 77th among 190 countries in the World Bank’s Doing Business Report. Explaining that the government was working on policies to promote inflows from domestic as well as foreign sources to achieve this vision, the PM stressed that the “policies are not designed to get some short-term benefit out of transient disruptions” being seen around the world.
Instead, the government is focussed on improving India’s competitiveness through long-term reform measures such as steps towards improving the ease of doing business rankings, tax reforms with lowering of tax rates and simplifying procedures, labour sector reforms to encourage formalisation and FDI-related reforms to further liberalise the investment climate, he added.
Since India has done away with capital controls against FDI in most sectors, Modi says the questions now are about India as an operating environment, covering financial regulation, tax policy, the behaviour of regulators, predictability of policy and quality of infrastructure. While many issues have been addressed in the ease of doing business effort, he said that the government would now focus on “the balance of this agenda”.
Last November, then President of the World Bank, Jim Yong Kim, had commended India’s historic rise in the ease of doing business rankings, adding that it was “remarkable that a nation of over 1.25 billion people has achieved a rise of 65 ranks in a short period of four years”. In fact, having improved its rank by 53 positions in last two years alone, India is now eyeing the top 50 club.
According to Modi, the key story is how the Fortune 500 companies see their production shifting, ideally towards more production in India. “We are constantly talking with these firms and understanding the difficulties that they face. We are very focussed on creating the financial, regulatory, capital controls, taxation, labour and infrastructure environment to make it convenient for global firms to bring goods in a friction-less manner into India, run factories or service centres here, and re-export the resulting products,” he said.
He further pointed out that Budget 2019 announced a scheme to invite global companies to set up mega-manufacturing plants in sunrise and advanced technology areas – including semi-conductor fabrication, solar photovoltaic cells, lithium storage batteries, solar/electric charging infrastructure, computer servers – promising them sundry tax benefits.
Urging industrialists to believe in the long-term potential of Indian market, the PM pushed them to “complete their investment plan without any confusion”, promising all possible support from the government. “Various ministries are in continuous dialogue with different industries to enable the private sector to grow at their full potential. We are willing to go as far as needed to ensure that ‘animal spirits’ are revived and our entire private sector is bullish,” he said, adding that with the government ensuring clean lending and sustainable growth, “it is just a matter of a short time before we see the private sector booming again”.
While acknowledging that sectors such as realty, automobiles and mining were in the midst of a slowdown, Modi was confident that demand in these sectors will revive with the acceleration of economic growth in the coming period aided by the above-mentioned policy measures. Speaking on the auto sector in particular, the PM said that the slowdown was transient, accentuated by credit constraints, some regulatory changes and passiveness in demand. “I would like to assure everyone that India has a large enough market and big enough policy space to ensure growth of internal combustion engine (ICE) based automobiles as well as electric vehicles (EVs). There is no need to speculate about the growth of either of the two,” he added.
Meanwhile, with India’s bad loan problem now under control, Modi believes that there is a requirement of optimum capacity utilisation for the private sector to make fresh investment. The strategic disinvestment of select Central Public Sector Enterprises (CPSEs) would open up many new sectors for private investments to chip in. With capacity utilisation crossing 75 per cent, India is expected to see growth in investment from the private sector in the coming months. At the same time, he clarified that the government would continue to aggressively push public sector investment and accelerate the execution for these projects to ‘crowd-in’.
Modi continues to bet heavily on the start-up ecosystem. “I consider entrepreneurs as India’s ‘Growth Ambassadors’. I want to tell them that our government will leave no stone unturned to make India a better place to do business in all aspects,” he told the daily. Modi said that even when the global value of FDI inflow was declining, India had maintained steady level of about US $65 billion of FDI inflows.