fresh thinking

In a topsy-turvy world, India looks like a beacon of growth and stability

Mark Hannant, 11th January 2017

With tumultuous political events reshaping parts of the world usually considered constant and secure, India, by comparison, appears a shining example of political stability, economic growth and predictability. Who would have bet on India as a safe haven?

Eight years ago, my wife and I did just that. We took a big punt on India. Upping sticks (with two toddlers in tow) we swapped leafy north London for the hustle and bustle of Mumbai, India's commercial capital. Our goal was to set up a business. Some of my former colleagues in London were dubious. Indian acquisitions of UK businesses such as Corus (formerly British Steel), Tetley Tea and Jaguar Land Rover were, they said rather dismissively, curious anomalies. We, on the other hand, saw these transactions as indicators of a more fundamental shift of economic power from west to east.

With the effects of the financial crisis biting, and austerity on the agenda in Europe and the US, opportunity and adventure beckoned in India. Its fast growing economy, rapid urbanisation, young population, and an emerging middle class driving demand for a host of goods and services, convinced us it was a dynamic and exciting place to invest.

And so it has proved. It's been a fascinating time to live and work in India and to see first hand a country undergoing profound transformation.

A newfound confidence is fuelled by a generation of millennials entering the workforce. 'Midnight's grandchildren' were born into a post-liberalisation era of opportunity very different to the scarcity and austerity that blighted the lives of their parents. Ambitious, well-educated and outward looking, India's millennials are less inclined to the collectivism of traditional Indian society. Digitally connected, tech-literate, mobile, increasingly affluent and individualistic, they are rewriting the rulebook and disrupting established orders. One million young Indians join the workforce every month. That trend will continue for the coming couple of decades. This is India's demographic dividend.

The delta of change that the country is experiencing is unprecedented and that creates a conundrum. It is a vibrant and exciting place to be an entrepreneur. At the same time it's a tough, complex market and many of the institutions and safeguards found in more developed economies are missing.

The World Bank's annual Ease of Doing Business report consistently highlights the difficulties. The 2017 ranking places India at 130th out of 190. In some areas India has made substantial improvements over the previous year, for example in the electronic payment of taxes, while in others, such as contract enforcement, it has slipped back. The net effect is a ranking on par with 2016 and it remains the lowest of the BRICS economies.

The challenges are myriad. The hard infrastructure of roads and ports, power supply and broadband are patchy, poorly maintained or non-existent. The soft infrastructure and market institutions that, by connecting buyers and sellers, provide a framework within which they can transact with confidence, are often unreliable or absent.

Despite the talk of 'start-up India' in the two and a half years since Prime Minister Modi came to power, the banking and credit systems still aren't in place to support the needs of small and medium sized businesses. Highly risk averse, Indian banks are largely geared towards meeting the needs of savers. Reliable market information is scarce. Trust is in short supply. These add hidden costs for those doing business in India.

These difficulties simultaneously create barriers and opportunities and that's one of the reasons it remains both a beguiling and frustrating place.

With uncertainty gripping other regions, whether fuelled by the unknown fall out from Brexit, the geopolitical implications of a Trump presidency, a slowdown in the Chinese economy or unremitting turmoil in the Middle East, India's potential becomes ever more attractive. Its stable democracy, huge scale and continued economic growth add to its allure.

Learn more

Munni Trivedi and I will be speaking about why India matters and the practicalities of doing business in India at the British Chamber of Commerce breakfast seminar in Singapore on 24 Jan. You can find our more here


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