MUMBAI // India needs to improve its infrastructure, cut red tape and deliver economic reforms to attract more investment from countries including the UAE, experts say.
The country’s prime minister Narendra Modi has been trying to attract more foreign investment direct (FDI), travelling the globe in the past year to encourage potential investors, with visits to the US, UK, Russia and the UAE.
Sheikh Mohammed bin Zayed, Crown Prince of Abu Dhabi and Deputy Supreme Commander of the Armed Forces, last week visited India on a three-day trip, which resulted in a raft of agreements between the two countries to pave the way for investment into sectors including aerospace and energy.
But India has an unenviable reputation for having a difficult investment and business environment, despite its favourable demographics, strong economic growth and wealth of natural resources.
“There is a need for an inward investment in infrastructure as a whole – ports, airports, railway networks, highways, and so on,” said Sultan Al Mansouri, the UAE economy minister, who was part of the delegation, t a briefing at the conclusion of the visit in Mumbai. “India has to think differently now when it comes to how to liberate that sector. The link between infrastructure and trade and businesses is unbelievable.”
Mr Modi’s trip to the UAE last August resulted in the announcement of a US$75 billion fund to support investment in Indian infrastructure.
Other hurdles to foreign investment are difficulties for potential investors to understand India’s complex legal system and regulations, including the relationship between federal and state regulations, and how to address challenges when they arise because of India’s clogged and convoluted court system, so these areas would need to clarified, Mr Al Mansouri aid.
The economy minister said that global investment into India should be “10 times” what it is at the moment, given the country’s potential.
Ahmad bin Harib Alfalahi, the UAE commercial attaché to India, said that he believed now “is the best time to invest in India”, although he admitted that it is a challenging environment.
“Yes, there’s a lot of things that need to change. Yes, there’s a lot of bureaucracy still going on, but keep in mind this is large nation of 1.2 billion,” he said.
Official figures released last week revealed an estimated growth of 7.6 per cent for the current financial year, although analysts have expressed some scepticism about how accurately that data reflects the reality on the ground.
Mr Al Mansouri said that India’s economic growth was encouraging. “It was very clear that the Indian side from the government were very prepared to make sure we address some of the legacy issues that we had concerning some of our investment. Also, together we were looking forward to future relationship in terms of the new upcoming sectors that we would like to focus on.”
The UAE’s Etisalat, for example, got into difficulties after it invested heavily in India and became unknowingly entangled in a $40 billion telecoms corruption case. The case resulted in the cancellation of 122 licences, prompting the company to leave the country.
Mr Modi has been striving to make it easier to do business, with initiatives including the Make in India campaign to transform the country into a global manufacturing hub.
“India is perhaps the most open country for FDI,” Mr Modi said, speaking in Mumbai on Saturday to launch a Make in India week showcasing its capabilities. “Most of the FDI sectors have been put on an automatic approval route. Our FDI inflows have gone up by 48 per cent since the day my government came into office. In fact, FDI inflow in December 2015 was the highest ever in this country. This is at a time when global FDI has fallen substantially.”
Abhimanyu Sofat, a co-founder of AdviseSure, an investment advisory company, said that India needed to “speed up” economic reforms, including the long-awaited goods and services tax, to improve the investment environment.
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