Bucking the Trend: Growth Opportunities in India..!!

While the global recession has forced many Asian economies to rethink their export dependency, India surpassed China this year in auto exports.

As renewed investor confidence contributes to an expansion in private consumption and investment, how are companies adjusting their growth strategies in India?

Key Points
• To attract more investment, India has to deal with perceptions – whether real or not – that it is a difficult place in which to do business, even for Indians themselves
• Infrastructure deficiencies are widely regarded as an obstacle that has to be removed
• India must develop its capacity to absorb investment funds and efficiently deploy the capital and successfully execute projects, especially major infrastructure projects such as airports

Synopsis
India’s resilience in weathering the global economic crisis and maintaining robust growth fuelled significant interest among institutional investors in the country’s markets in recent months, especially after the national elections in May. FDI, however, has not risen in tandem. Yet, growth opportunities in India appear to be multiplying rapidly. Robust exports of autos and auto components are one positive indicator.

The injection of stimulus funds has, in part, been responsible for India’s strong performance during the crisis. But eventually India will have to wean itself off of the stimulus “drug”. To be sure, the flow of institutional funds into the financial markets has already slowed. Investors have become more discriminating. The challenge for India will be to attract the investments required to drive the growth it needs over the long term.

Whatever the realities on the ground, India will have to overcome perceptions, especially among investors outside the country, that it remains a difficult place in which to do business, even for Indians themselves. Beyond that, India must break significant bottlenecks that are preventing it from achieving higher growth.

Infrastructure deficiencies are widely regarded as an obstacle that has to be removed. India’s global ambitions for its auto and auto parts industry will not be realized if it does not build the roads and ports it needs. Raising the funds for these projects may be challenging, but even more difficult is the actual deployment of the capital. Relatively efficient execution is possible in India. Hyderabad’s new airport is a good example. Other airports have taken much longer to complete.

Hardware and software deficiencies have undermined India’s capacity to absorb investments and facilitate the execution of projects, hampering the country’s economic performance. The economy could do much better than it is doing, and more jobs could be created if India were able to successfully reduce these inefficiencies. Every reform measure will help increase India’s competitiveness and make it more attractive to overseas investors.

In addition, India could boost its growth by investing in innovation and R&D, focusing on the sectors where it has developed a competitive advantage. In IT, for example, India already has built up innovation clusters across the country that could help attract more investments.

Happy Reading..!!