“Come to India and try your luck.” That was precisely Indian Prime Minister Narendra Modi’s message to the Japanese business fraternity. One of the highlights of his 5-day visit is certainly the Japanese PM Shinzo Abe’s promise of INR 2.10 lakh crore investment in India. We got to see a flash of Modi’s entrepreneurial spirit in the way he went about conveying India’s USPs. He not only identified the sectors (manufacturing and electronics to begin with) that could do ‘miracles for the Japanese investors but also provided ample reasons to substantiate his statement – low-cost manufacturing, skilled manpower and liberal business environment.
Ostensibly, the narrative of foreign investment has kindled a hope of economic resurgence. Modi’s articulation of ‘Make in India’ vision and the willingness to replace ‘red tape’ with ‘red carpet’ sound impressive, or at least distinct from the hackneyed official statements that used to emerge after every bilateral talks.
Economics as driver of foreign policy
Modi has gone full throttle to make his intentions clear. Economic growth will dominate his approach towards foreign policy. However, a question that I can’t resist asking – Does the world share the same confidence that Indian Prime Minister tried to sell during the trip to Japan? An outright yes might not be the answer.
Only a few months back, a study revealed how pro-business sentiment gripped the entire country after the establishment of Modi government. In fact, global investment is projected to witness over 100% increase in foreign investment inflows, which is likely to be more than $60 billion. All this might be true. What also seems to be true is that the new government is not capitalizing on its “mandate for change” and it’s yet to make any radical reform.
While political instability can no more be an excuse for the foreign companies to shy away from India, there are still some formidable challenges before them. One of the most onerous tasks for foreign entities is to convince the Indian government about the usefulness of their project. Another frequently talked about challenge is the prolonged delay in resolving business disputes despite the provision of third party arbitration. Dealing with bureaucracy at local, State and national level is another turn-off for the foreign companies who want to move things forward.
Corruption rules the roost
Even if Modi eliminates red-tapism, will that be enough to wipe out corruption? In order to roll out the red carpet, the BJP government needs to earn goodwill. And that’s not going to happen as long as corruption rules the roost in Indian business ecosystem. The ripple effect of corruption is cut across economic sectors. The government-corporate relationship has gone sour because of the repeated surfacing of the nexus between politicians and businessmen. Loans to corruption-ridden industries have affected the State-run banks. Major development projects remain a “work in progress” because of the corrupt officials who are at the helm of affairs.
Infrastructure inefficiencies are equally to be blamed for the slow influx of global business in India. Less than satisfactory energy supply and unmetalled roads have brought much criticism to our previous governments and this is where Modi government has to give a hard look. It has to create that conducive business environment, which would position India as a destination to count on.