Why affiliates in India are the way to go.
Over the past three years, India has seen something akin to a minor
revolution in terms of its attractiveness to foreign investment. This has
culminated in four current truths about the Indian market that were not so
easily apparent five years ago.
Firstly, the Indian economy supported by a growing middle-class consumer base
and as a direct result of sensible and pragmatic reform put in place over the
past decade is now a huge and sustainable market economy for foreign investors
to sell to. The banking system is stable, India possesses relatively little
foreign debt, and none of the specific debt that has afflicted much of the
global economy over the past 18 months. Indian exposure to the sub-prime
mortgage crisis has been minimal.
India's middle class is estimated at 250 million people – little wonder that
brands such as Porsche and Ferrari are now sold in the country and brands such
as Jaguar are now Indian owned. Even at the lower level opportunities also
exist, in India Levi's jeans are considered a status symbol. While poverty
remains an issue in many rural areas, India's current economic models and rural
development policy indicate that hundreds of millions will be lifted out of
poverty within the next 10-20 years, further creating demand.
Secondly, this process of development and reform has been given a major boost
politically. India has had to deal with two decades of coalition governments,
with the country's infamous democracy unable to decide which party should have
an overall mandate to govern. The result has been a modern India derided for the
shortcomings of its democracy and of a government paralyzed to do any meaningful
reform due to the constant horse trading needed to get any legislation through.
Legislation that has been passed have so often been watered down by minority
views with vested interests that impact has been minimal.
Over the same period, China has stood up, and with a one party state, been able
to enact real progress. China is often now held up as a model of optimum
governance, whereas India is typically depicted as politically backward,
moribund and argumentative. While this may have been true, such pictures are now
outdated. India has a government now that can effectively manage reform and get
much needed reform passed through the legislative bodies. The Congress Party won
a decisive victory in Indian general elections a year ago, and the party has
wasted no time in seizing the opportunity to radically reform Indian
competitiveness and commerce. India now has strong political leadership with a
business friendly government open to transparency and reform. This is expected
to continue.
Third, reform involves removing trade barriers, opening up to foreign
competition in domestic markets and getting government out of business. While
some progress still needs to be made in key politically hot areas such as
insurance and mass retail, generally India is open to foreign investment, and is
becoming more so. Such reforms will continue and change, and this is to the
benefit of early players who can enter the Indian market and steal a march on
their rivals.
Lastly, tremendous opportunities exist at this very moment for foreign investors
to get actively involved with. However, these will not stay incumbent for long.
One of the points always pointed out to me is the legendary state of disrepair
and backwardness of much of India's infrastructure. Many compare it to the
vastly superior infrastructure available in China. Yet the problem is also the
opportunity. Just as China's infrastructure was backward twenty years ago - I
recall donkeys and carts along the then main, two lane Beijing airport highway -
so India will fix its infrastructure problems too.
As we noted in our previous issue of India Briefing "Investing In India's
Public-Private Partnerships," the government is making finance and industries
available for foreign investment and participation to assist with the
redevelopment of the country. For a nation the size of India, the opportunities
are staggering. India's infrastructure problems are not just a problem, they are
now the bedrock of reform and a rare chance for multinational businesses to
enter into a market that is going to deliver, in the words of Prime Minister
Manmohan Singh, "sustained 10 percent growth for the next 25 years."
Meanwhile, in terms of global opportunities, India offers two faces. The west
coast, and the port city of Mumbai, overlooks the Middle East, Africa, and
Europe. The east coast, and the main port of Chennai, overlooks Thailand,
South-East Asia, Singapore, China, Japan, Australia and to the U.S. west coast.
With easy access to these markets, in addition to a wealthy and increasing
middle class population, the India of today is strongly reminiscent of China in
terms of providing both a domestic market and an operational base for exports.
India, quite simply, is in duality a market and an opportunity for growth that
foreign investors simply cannot afford to overlook if they want to achieve
sustainable growth. As domestic markets in Europe and the United States slow
down, India is the place to be for foreign investors looking to obtain high
growth for the next decade and beyond, and may even surpass China in its ability
to do so.
All that being said, keep in mind my home job is based in the United States, but through friends of Indian descent, my affiliate home job has had more growth in India than any other country in the world
