Indian foreign direct investment (FDI) inflows crossed another milestone in the middle of the heart-wrenching second wave of the coronavirus by nearly doubling (jumping 90%, to be precise) over the same period last year. Of this, FDI equity inflows rose by 168%.
The sector of the economy that saw the most dizzying interest was automobiles, which topped charts in FDI inflow. In the electric vehicle (EV) segment, some calculations show that more than `25,000 crore in investment has poured in. India is working towards its goals to shift to mostly sustainable fuels in commercial vehicles as well as two- and three-wheelers by 2030, and move to this technology in a significant volume even in private vehicles.
This interest will likely continue, especially as companies like Ola (preparing these days for its own IPO) and others like Ather Energy work towards making the electric scooter as aspirational as La Dolce Vita once made Vespa. This, of course, is apart from all the efforts being made by traditional automakers like Bajaj, Mahindra and Tata Motors to transform the way India travels, moving from fossil fuels to electricity.
But think of investor interest in mobility not only as a sectoral attribute. Think of it more as a metaphor.
What investors are really putting in money for is a sense, an anticipation, of mobility in the Indian economy. In more ways than one, with Covid-19 vaccinations starting to hit 10 million doses delivered per day and domestic air traffic rates rising consistently, there is a strong sense that India is back on the move.
The country’s historic levels of new investment in building highway networks to resolve a long-standing infrastructure bottleneck is part of this 360-degree effort at pushing mobility. In his Independence Day speech this year, Prime Minister Modi highlighted new airports as a major plank to future development—at last count, around 6 of 21 new greenfield airports that are cleared in-principle by the government have already been constructed and operationalised.
After introducing the FASTag electronic toll collection system to speed up toll waiting times on highways, plans are reportedly afoot to introduce an even smoother GPS-enabled system using digital wallets for payments. The new drone policy has dramatically dropped entry barriers to unlocking value in Indian skies in a manner never done before. By making the process based, to a great extent, on self-certification, the effort is to ensure that there is no regulatory choke in a sector that can bring exponential benefits.
There is a palpable sense in India that things are being hastened in many ways. Big-ticket asset monetisation is on the cards and if that goes through equitably and without any systemic hurdles, it will add to this process of deep value unlocking. Further, deep digitisation continues its romp, not least with a string of upcoming IPO plans that hope to change the way wealth is created in the country.
At every level of this process, primary and ancillary value is being unlocked. This entire mobility superstructure is what is generating investor interest. It is important to understand why this would be exciting. That India has always had several sectors where wealth could be generated was never a secret. But what had traditionally held the country back were two things—streamlining regulations (thus also bringing down entry barriers and rent seeking) and interconnectivity, the idea of looking at the economy holistically and ensuring sectoral reforms speak to one another rather than operate in silos.
These interconnections are being made as reforms happen in progression and in conversation across sectors. For instance, without the tremendous leaps in financial technology and the digital payments infrastructure, and advancement in Indian use of GPS including India’s own GPS-system, NavIC, something like a GPS-enabled toll system would not have been considered for deployment.
The spirit of reforms, with Indian characteristics, is not only to take giant strides in opening sectors to foreign investors, but also to ensure that the administrative inflexibility that can threaten even the best-laid plans is cleared out. Think of this as removing stones from a pipe. No matter how much water is poured into the pipe, unless the stones are removed, the water cannot pass through. Water could wear out the stone, but that would take an impossibly long time.
India has been removing, one by one, many of the stones that had traditionally held back the flow of its entrepreneurial and economic energies. This is the spirit of mobility that investors are learning to value today. About time, too.
Hindol Sengupta
Vice President & Head of Research at Invest India, GoI’s national investment promotion agency
(hindol.opinion@gmail.com)