Long seen as an underachiever in the global economic sweepstakes, India is now a hot commodity as a prime minister with a strong pro-business reputation comes to power in Delhi, according to longtime U.S. India-watchers.
With newly-elected Prime Minister Narendra Modi triumphing this month on the battle cry of economic development, markets and investors are taking a fresh look at the world’s largest democracy.
“The entire globe is eyeing on India because of the economic opportunities,” Purnima Voria, founder and CEO of the National U.S. India Chamber of Commerce. said in an interview.
Ms. Voria, who also serves as an adviser to Secretary of Commerce Penny Pritzker, said Mr. Modi’s election will make India a destination for development.
“With Modi’s leadership it’s going to be 21st century. It’s going to be India’s century,” she said.
The 63-year-old Mr. Modi and his Bharatiya Janata Party swept to power backed by a young electorate who supported his promises of economic renewal based on his experience expanding the Gujurat’s economy as the province’s chief minister. Mr. Modi was sworn into office on Monday.
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The optimism is clean break compared to investor hesitancy and disappointment in the past three years.
India’s economy began to slow in 2011 in the face of rising interest rates, higher inflation and widespread disappointment with the economic reforms instituted by the former government. Foreign investment rebounded in 2012 due to the reforms and measures to decrease the deficit, but the economy hit an all-time low last year after leaders failed to make any economic progress.
While two-way trade between China and the United States hit over $562 billion in 2013, for instance, bilateral trade between the United States and India totalled only $62 billion, according to the U.S. Trade Representative’s Office.
“The relationship has over the last years evolved into disappointment leading to acrimonious activity on an economic basis,” said Diane Farrell, acting president of the U.S.-India Business Council.
The main causes of investor reluctance in the past years, she said: confusing taxes, initiatives that drove away the international supply chain and disputes over intellectual property rights.
“When American companies see ambiguity, they want to stay on the sidelines,” said Gunjan Bagla, founder and managing director of Amritt Ventures, a California-based company that counsels American companies on doing business in India.
But Ms. Farrell said there still was positive aspects over the past couple of years in the U.S.-India business relationship.
“I think it’s important to keep some perspective on the relationship,” she said.
The World Bank forecasts continued growth for India’s GDP over the next three years, projecting the Indian economy will grow 6.2 percent this year and 7.1 percent in 2016.
According to the U.S. Trade Representative’s Office, trade between the United States and India has increased a hundredfold since the early 2000s and, despite the difficulties, India is the U.S.’s 11th largest trading partner.
There’s continued hope for American investors across the Pacific. In Mr. Modi’s first days as prime minister, he has released 10 top priorities, asking his ministers to prepare an agenda for the first 100 days.
“He’s asking his cabinet ministers, I expect you to work 18 hours a day,” said Mr. Bagla.
He said Mr. Modi is ready to make changes towards economic development through executive action. Mr. Bagla, who has already taken an American investor to India since Mr. Modi’s election, said American companies who move quickly can capitalize on the new attitude coming out of Delhi. American companies have a “nimbleness” that European and Japanese companies do not.
Mr. Modi’s priorities include increasing confidence and transparency in the bureaucracy, improving the country’s infrastructure and investment climate, and doing a better job exploiting the country’s natural resource base.
“This is the most pro-business government that we’ve ever had in India,” said Mr. Bagla.
Ms. Farrell said one million jobs need to be created to keep up with vast and youthful population. She said Mr. Modi has already laid out his philosophy to job creation: “Instead of a handout, it’s a hand up,” and “less government, more governance.” But Ms. Farrell also warned about expecting an overnight transformation of the Indian economy.
“We’re talking about management of a incredibly diverse country with 1.2 billion people,” she said. “Patience must be counseled.”
• Meghan Drake can be reached at mdrake@washingtontimes.com.
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