While Prime Minister Narendra Modi was enhancing economic engagement with Singapore, Bloomberg TV India tried to sense the pulse of investors on India. A panel comprising Sanjay Mathur, Head of Economics Research for Asia Pacific Ex-Japan at Royal Bank of Scotland; Rana Gupta, MD for India Equities at Manulife Asset Management; Sanjay Guglani, CEO of Silverdale Capital; and Vishal Kumar, MD, Investment Management, shared their views on the pace of reforms and the India growth story. The analysts acknowledged that getting the GST and Land Acquisition Bills passed in Parliament will be a tough challenge. While India’s GDP growth has been relatively high, the macroeconomic conditions are still not as strong as they ought to be, as India Inc is plagued by excess capacity and the banking system is saddled with NPAs. India, therefore, still needs more reforms, the analysts pointed out.

Prime Minister Narendra Modi’s two-day visit to Singapore marks 50 years of diplomatic relations between the two nations. Sanjay, how do you see Modi’s visit to the island nation?

Sanjay Mathur: Prime Minister Narendra Modi’s visit to Singapore has definitely been very constructive. It is important to sort of emphasise the importance of India from a global economic standpoint and from a geopolitical standpoint. This has always been a focus as far as both the nations are concerned. But I think there is a particular resonance when the head of the state does that and it sort of displays the degree of anxiousness, desire to get more funds into India and to move productive assets. So it’s definitely been a positive development. In terms of how long it is going to take to get fresh investments in manufacturing capacity, a lot depends on what is happening on the ground. We are in a situation where, despite the strong GDP numbers, the macro conditions at home are not as strong, in our view. We got an industry that is plagued by excess capacity. There are problems in the banking system. We still need to see more reforms. It would be a tough challenge to get the GST Bill and the Land Acquisition Bill passed in Parliament. But for now I think the start is definitely a positive one.

India seems to be in a sweet spot when it comes to the global context currently. Rana, do you think it is perhaps too easy to ride on that?

Rana: India, within the emerging market context, is fairly well placed and we broadly know the reasons why. But having said that there is a need to highlight that when the head of the state does that, it of course gathers more importance and it also gives you a wide audience. How fruitful have these visits been? I think we need to track what kind of investments go into India as a result of that. And the fact is that FDI is rising — probably the FDI run rate is $40 billion, which is a pretty healthy run rate. If I just look at a sequence of events — Foxconn is looking to invest in India, there are many other MNCs who are already present in India. All these companies see long-term potential in India. Very recently, we heard about Qatar and RasGas renegotiating India’s billion dollar penalty. So these are very encouraging data, which point to a very good start.

SanjayGuglani: For example, if you are talking in terms of FDI in the first half in India, it has been the highest in the world. We have got FDI to the tune of $31 billion, compared to $30 billion into China and $28 billion for the US. The numbers are of course impressive. Here the interesting thing is in terms of opening up of various sectors. To give you a flavour, in the Railway Budget of this year, the capex for the next five year is more than the capex done by Indian Railways ever since India got Independence. More interesting is the fact that foreign investments are coming into Indian Railways. It could be quite a massive change, which it will bring into the Indian economy as a whole.

Don’t forget India got Independence partly because of Indian Railways joining the country together. And, we see a multiplier effect happening as far as the Indian Railways is concerned. Similarly, opening up of FDI in defence is a very good economic move. If you see in terms of the nitty-gritty and in terms of domestic problems in India, I don’t think they are insurmountable. Yes, India is impacted by the world. As much as 25 per cent of its exports are petrochemicals. So, if other countries are not doing well, the exports have to suffer. And also if you look in terms of pure numbers you get misled. Of the total exports, 18 per cent is in the petroleum sector. If petroleum prices come down, India’s exports come down. So it has to been seen in an overall context of various numbers to get the right picture.

Vishal, in terms of overall sentiment, how does India look from your point of view, particularly some of the deterrents?

Vishal: In the last 18 months, I think at least our expectations were not that high. We didn’t expect them to be able to do miracles in just a short span of 18 months. We have been a far bigger country to be able to make such big changes in these 18 months. In terms of specifics, the government, I think, have a few good things, and may be not everything. But they are not able to manage the legislative process better, as the GST Bill is still hanging and the Land Acquisition Bill got into a bit of a tangle. But on the FDI front, the government has made a lot of positive changes. A lot of sectors have been opened up. The real estate sector has been completely opened up. Same is with the retail sector. A lot of problems that were occurring in the daily business of foreign investors have been improved to a large extent in the last three-four months. The government has removed the wealth tax, which was an unnecessary hassle. They have simplified a lot of the tax regulations that were creating problems to foreign investors. Some things over and above these have almost been clarified. So we don’t need to worry about being hassled or harassed by the tax administration.

They have again opened up a lot of regulations on the alternate investment funds (AIF) front, where foreign investment is allowed and FDI is allowed in real estate investment trusts. The government has already addressed a lot of things which were becoming bottlenecks for no reason really at all and which did not require a big administrative or legislative process. In terms of big things, the government has opened up the coal auctions. Actually, today, we are a power surplus country for the first time in history — there is more than enough power and diesel generator sets are no longer running much in India. The telecom sector is doing better. In a nutshell, there are a lot of positive moves the government has made. However, there are some hiccups in the way. Some of the non-economic situations have gone out of hand, which should not have, and that obviously bothers the institutional investors a lot. But I would say overall the government has tried and has been successful in some things and they have not succeeded in some other things. I think the direction is okay.

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