India Investment Attraction Strategy
Investments are the building blocks on which an economy is built as it links the present with the future. Investments are a significant factor in a nation’s economic development which is an essential source of employment generation which leads to an increase in the national income. Investments have a major stake in the growth & development of industries and service sectors; all these factors collectively contribute to the prosperity of a country.
Strategy without tactics is the noise before the defeat. Just as strategy without tactics is the shortest way to suicide in a defeated platform. The tactics to attract investments should be based on a clear set of objectives that can be achieved by implementing them. A few strategies that India can focus on in order to attract investment are discussed:
- Play a key role in regional infrastructure development: India should focus on regional infrastructure as it will create a positive relationship with the regional business. India signed Motor Vehicles Agreement (MVA) with Bangladesh, Bhutan, India and Nepal (BBIN) for the regulation of passenger, personnel and cargo vehicular traffic among the four South Asian neighbours which is a significant investment step towards regional connectivity. This will pave the way for a seamless movement of people and goods across their borders for the benefit and integration of the region and its economic development. These economic corridors could increase intraregional trade within South Asia by almost 60% and with the rest of the world by over 30%.
- Development of Investment Attraction Initiative
- Promote Investment opportunities with regional partners: Mostly it is seen that the investment attraction efforts are focused on finding investors from outside a region. But it is considered by many economists that the core of business development comes from building on existing industry clusters within a region. With this logic, India should try and tap local investors for business development first.
- Enhance local existing business: India should strengthen ties with various chambers of commerce. These organisations can act as liaison offices to facilitate investment in India.
- Promote Regions strength: The South Asia Satellite (SAS) built by Indian Space Research Organisation (ISRO) to boost communication and improve disaster links among its six neighbours has opened up new horizons of engagement in the entire region and has helped India to carve a unique place for itself in space diplomacy. This satellite will help efficiently in natural resource mapping and will boast the regional economy.
- Develop an investment attraction initiative information page: For investment attraction the government should focus on the Pre-active stage of investment preparation by this government can know its targets; what programs and services are available provincially and nationally; will know all the regional resources and assets and in which region the targets should be allocated. These can be achieved by methods like partnering, strategically allocating resources and offering financial initiatives. India should focus on investments that would remain as valuable assets in the country even after the investee company leaves like infrastructure, technology exchange etc.
- Sector-specific considerations: Having sector-specific investment considerations will boast India's development in a strategic way. As economic development and connectivity are interconnected as between energy use and energy sources lies the transport of energy, and the energy infrastructure. Making the energy supply more sustainable, saving energy and making different sectors (built environment, industry, etc.) and forms of energy (electricity, gas, heat) more interconnected will place new demands on existing and new energy infrastructure. Having a sector-specific investment regime can help the government to give incentives and initiatives in a better-channelized form.
- Indian Diaspora: It is to note that brain drain which was a problem a decade back is now a boon in the form of Indian Diaspora. The presence of the Indian Diaspora across the globe has a positive substantial positive effect on attracting investment in India. These Indian Diaspora present across the globe can act as brand ambassadors in projecting India's image. Indian government's initiative towards celebrating Parvasi Bharati Divas is a great initiative to connect the Indian diaspora across the globe.
But what really makes a country more attractive for investment? Is it a good Law and order situation? Or is it a good business-friendly model of governance? Here are the top factors that make a country richer, more progressive and a good wealth-creating society-
- Political Stability is the first factor that the investee country looks for as no country would wish to invest in countries where there is political instability which can jeopardize their investment for instance there is the least investment in Syria and Iraq.
- The size of the economy & potential for growth also matters to a great extend though the economy may be small it should have the potential to grow over the span of time. Fair, transparent, competitive, and open markets are always preferred for investments.
- Labour productivity and skills that is technically well educated, high quality and low wage flexible labour and workforce add an advantage to the economy. Industry-friendly labour laws for instance Chinese labour laws are more in favour of the industries which is the reason China has cheaper goods. The disciplined labour force always attracts investments for instance Singapore during the 1980s had high unemployment and labour cries along with housing crises. The government had worked in giving affordable public housing to the labour force so that they have social security, further, it focused on having greater employee rights which lead to a decrease in strike rates which results can be seen in its economy. A country with specialized human resources is always a favourable destination for investments.
- A good transport network with proper synergy of road, rail and port for instance India’s signing of the Motor Vehicles Agreement (MVA) with Bangladesh, Bhutan, India and Nepal (BBIN) is a step towards enhancing transport, connectivity and trade with regional players.
- Along with connectivity high-Grade infrastructure and a good communication system play a critical role to attract investments. A report by World Bank has found that a 10% increase in internet access correlates to a 1.38% increase in GDP in developing countries. Similarly, a recent study found that fast internet infrastructure can stimulate job creation with between 4.2% and 10% higher employment rates in connected areas relative to unconnected areas. The government initiative of digital India can play a great role in attracting investments.
- Strategic location and resources act like a cheering topping in attracting investment for instance Singapore doesn’t have natural resources like coal, oil etc but what it has the other countries can’t but i.e. the strategic location. The island sits in the middle of a crucial trade route connecting Asia to America and Europe. India’s geo-strategic location in the Asia Pacific region connecting it with the middle east can be a boon for its growth.
- Good institutions, better policing & security with stable law & order situation in the county make a country more attractive to attract investments. India’s successful implementation of the Insolvency and Bankruptcy Code (IBC), introduced in 2016, has worked in its favour. Additionally, India made starting a business easier by abolishing filing fees for simplified proforma for incorporating a company electronically.
Way ahead for India
What India needs for achieving this 5 Trillion Dollar economy tag is a multi-pronged strategy that would put the nation in a much more advantageous position to handle things to take care of its demographic dividend as well as burden. We need to put to use cutting-edge technology and bridge the gap between the people and its resources. This would give an edge towards making the ICOR- Incremental Capital Output Ratio low and overall efficiency, effectiveness and economy at its peak. We need to work on every front keeping in mind examples like China and the Erstwhile economies of South East Asia- Tiger Economies which were in a much disadvantageous position but handled their resources in such a way that forced the world’s leading manufacturers and companies to reach to their doorsteps.
India along with building a strong labour force should also focus on other key issues like
- To focus on removing the barriers to FDI like regulating the level of restriction on foreign ownership, enhancing the ease of doing business and having low amounts of red tape in decision-making, screening and approval procedures in order to remove constraints on foreign personnel and promote operational freedom.
- To work towards bridging knowledge and expectation gaps in India and with other countries' business community
- To focus on building institutional ties with the other countries for this the government can have regular policy dialogues between the Ministry of Finance and NITI Aayog to explore opportunities. This can be done at an official level and can include other working groups.
- To strengthen efforts to provide facilitation services and should the competitiveness for foreign direct investment in the SME sectors
- To focus on joint research projects on bilateral investment opportunities with other nations from where India is focusing to get Investment for this the government should focus on having short research projects with the other investee nation in order to better understand the experience and potential of institutional investors in India or of Indian investors in that nation.
- To focus on pursuing greater investment protection for this India should enhance investment ties with other nations and should enhance the terms of the Bilateral Investment Protection Agreement for instance incidents like the Vodafone tax evasion case and the government passing a retrospective law such acts should not be encouraged as it weakens the trust of the foreign investors.
- India in order to attract investors to invest, India should develop adequate facilities and infrastructure; prepare skilled human resources and set up an effective and efficient bureaucratic system.
- India should explore the sectors that attract investment and can make India a key regional player for instance Tunisia’s service sectors like health care made it a major player in Africa and Europe region. India’s demographic dividend of a high number of youth and skilled human resources can play a critical role in the region.
- India to attract investment should be able to explore opportunities in every challenge for instance because of the current covid19 situation the global insurance sector is facing big challenges as they have to process a lot of claims but the sector has found an opportunity in that even by advertising aggressively and attracting more customers as everyone is afraid of medical problems in future, by this way the sector has stocked the old invested money and is giving the claim from the current generated money. India’s step towards relaxing export curbs on paracetamol and delivering 3 million packets of it in British supermarkets is an applaudable step.
- In India land is a state subject and but land acquisition is on the concurrent list which can be a hurdle as major investment revolves around having a favourable investment regime.
For the next 50 years there would be three drivers of growth, first would be technology, second would be economy and third would be demography; all three are in India’s favour if we utilise our potential wisely. India needs to focus on technology as technology changes with every passing day, you can’t catch it, it keeps on transforming the only way to move by matching steps with it is through research and innovation. Further, anything that is not sustainable can’t be called development. Our economic development process has to be not only sustainable but also inclusive. Lastly, India has a brighter future as our demographic dividend i.e. 65% of the population is under 30 years and we have the world’s largest market with democratic institutions in place.