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How India Turned Itself Into A Key Destination For Foreign Investment

How India Turned Itself Into A Key Destination For Foreign Investment

When Indian Prime Minister Narendra Modi of India took his oath of office on May 26, 2014, one of the most pressing issues facing was the stagnating economic growth. With per capita income rates increasing at rates slower than the world average, and general public frustration regarding job and wealth creation, Modi needed a significant, game-changing move to bolster the Indian economy. 

And thus was born perhaps the single largest economic campaigns of India’s history: Make in India. The new campaign became the center for all Foreign Direct Investment (FDI) policies to come. By selling the world on the vast array of capital resources available in India, Modi allowed 100 percent FDI — that is, foreign investors can wholly own the projects — in 25 different sectors of the economy, opening it up to investment from all corners of the globe. Within the first year and a half of the campaign, India received investment intents worth over $250 billion, propelling it to the top of the charts as a destination for investment. 

Attracting The Foreign Investor

The campaign mainly sought to double down on the ease of doing business in India. For many years, foreign corporations found it difficult to conduct their operations within the country. With a complicated set of laws and tax codes and little clarification on policies, the government set out to simplify the system under the direction of Modi. At a central level, a “Make in India portal” was established for foreign investment inquirers to obtain information and clarification on laws and processes from the Indian government within 72 hours of submission. 

He also challenged the states of India to improve in this metric, leading to the formation of state campaigns too, like Happening Haryana or Magnetic Maharashtra. These reforms at both central and state level saw India rise 42 places in the Ease of Doing Business index, an improvement it hopes to continue seeing into the future. 

The campaign also focused on improving the quality of the manufacturing process in India, digitizing the economy and modernizing connectivity systems. Furthermore, Make in India also encompasses new industrial and freight corridors to improve the shipping process, while large investments in road systems, waterways and airports have been made, too. 

Seeing this vast reform in infrastructure, systems and policies, numerous international business groups have invested in India. Technology manufacturing giants Foxconn and Samsung have committed to investing over $6 billion in the next five years, with the latter planning to manufacture its new Samsung Z1 phone in India. In the energy sector, Saudi Arabia’s Aramco has committed to a project in India worth nearly $45 billion.

Earlier this year, e-commerce giant, Inc. (NASDAQ: AMZN) and retail king Walmart Inc (NYSE: WMT) set their sight on India in the historic acquisition of Flipkart, India’s largest online retailer. While Walmart’s bid to acquire Flipkart was eventually accepted, Jeff Bezos and his team committed to shelling out $5 billion in India over the next few years to cement their own position in one of the fastest growing e-commerce markets in the world. 

What The Numbers Tell Us

The market has largely responded positively to the efforts the government is making for the economy. Over the past four years, the major stock indices have reached growth rates of nearly 55 percent, much like some of the largest economies in the world.

Numerous other economic indicators have also confirmed improvement. India’s business confidence index has increased by over 18 percent since 2014, when the campaign began. Foreign Direct Investment is at record breaking highs as GDP growth is steadily nestled between 8 and 10 percent. India’s GDP as a share of the World GDP has risen 0.8 percent in the last four years, against the 0.55 percent increase in the four years before that, while inflation has been curbed from the 9-10 percent range down to the 3-5 percent range, which is generally a much healthier target. 

While these figures do tell us that India is on the right track, it will no doubt take time before India’s economy will realize its full potential. But as Narendra Modi himself said in an interview, “It takes seconds to maneuver a scooter, but it takes time to maneuver a train; India is a train and it will take time to bring it onto the right track.”

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The preceding article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.

Posted-In: India Narendra ModiNews Emerging Markets Global Markets Best of Benzinga


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