Strong vote for India’s business strength, but watch red flags
US President Joe Biden and French Premier Emmanuel Macron laid out the red carpet for Prime Minister Narendra Modi recently, shrugging off human rights concerns. For various reasons, they were betting on a long-term business partnership with India, aimed at boosting their own economies. Biden’s and Macron’s bet has just found endorsement from one of the world’s largest institutional investors, the Capital Group. In its report, the USD 2.2 trillion asset manager says India stands apart as an investment destination compared to other emerging markets because of the relative political stability, infrastructure development, strong manufacturing potential and growing equity market. Some of the important strengths, the report noted, are the Unified Payments Interface (UPI) which has revolutionised and digitised the payment system, and the infrastructure boom—the rapid growth of airports, roadways and seaports has improved connectivity and reduced travel time.
Another strength missed by many is the country’s massive manufacturing base, epitomised by literally millions of MSMEs that have a great capacity for growth and innovation. Evidence of India’s increasing heft came in from global capability centres of multinationals, who have ramped up their talent search in India this fiscal to offset the recessionary headwinds that have kept hiring muted in the West. As per specialist staffing firm Xpheno, these MNC arms in India covering pharma, retail energy, automotive and telecom, will be hiring as many as half a million heads to fill both attrition vacancies as well as growth plans.
While there is no doubt that India as a destination for global investment is building on strong foundations, the weakness in the superstructure may do us in. Numerous voices at home and abroad have expressed concern about the lack of inclusiveness and growing human conflict. The European Parliament, during the prime minister’s recent visit to France, expressed dismay at the continuing civil strife in Manipur, and called upon the government “to protect all religious minorities, such as Manipur’s Christian community, and to pre-empt any further escalation”. The growing marginalisation of the Muslim community has also drawn flak from various quarters. Global investments move to markets that can assure long-term stability. A strife of any kind is anathema to business. At low intensity, local disturbances don’t seriously impact business; but beyond a point, if political stability is rocked, it will come back to bite the country’s credibility as an investment magnet.