India needs to improve image as investment destination
Tuesday, 07 January 2003, 20:30 IST
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HYDERABAD: Top business leaders Monday said India needed to do much more to improve its image as an investment destination, noting that the country was getting only a fraction of foreign capital it could pull in. Speaking on the global economic outlook on the second day of the Confederation of Indian Industry's (CII's) annual Partnership Summit here, Bharti Enterprises managing director Sunil Mittal said India was not doing enough to strengthen its image though the country had everything going for it. He said there was a strong case for investors in the U.S and Europe to come to India in a big way. India, he said, should receive much higher foreign direct investment (FDI) inflows than it was getting currently. He noted that India got FDI of $5 billion, which worked out to just 1.7 percent of the gross domestic product (GDP), last year, though other estimates put the figure at between $5-9 billion. China, on the other hand, had been attracting FDI of $40-50 billion annually in the last few years, he pointed out. Mittal, however, said the Chinese growth was tapering off and could be lower in the next decade as the country cannot sustain 10 percent annual growth for too long. "That brings India into focus, given its tremendous advantages," he added. P.K. Basu, director and chief economist on South Asia and India for Credit Suisse First Boston, said India needed to build on its image and brand name with focus on quality. He said the positive thing about India was that its foreign exchange reserves grew by $22 billion in the last 12 months. Basu said the country should achieve a growth rate of 8-10 percent over the next 8-10 years. "Our presence in the international market is limited, though the presence could be huge in some sectors. We have been looking at the West more than we have been looking at the East," he said. Referring to China, he said it was currently over-investing and adding to overcapacity with fresh investments growing at the rate of 15-20 percent. But this was not sustainable in the long run. Thus, in the midterm, China was a potential candidate for economic crisis. India, Basu said, portrayed the stealth miracle. It still had the fastest growing economy among the world's democracies. India has achieved a current account surplus of $4.5 billion. The services sector has turned out to be huge generator of surplus. Merchandise exports were still a hopeful case with growth of 11.5 percent a year for 11 years since liberalisation in 1991. India's share in the U.S. exim trade had grown from 0.6 percent in 1996 to 1.1 percent now. In the next 18 months, India would become a net creditor nation, which China already was, he said. Mittal said the global economic outlook for the current year brought new opportunities for India. Europe and U.S. had a very bad 2002 and the prognosis for the current year was not bright either. The U.S., he noted, was struggling to kick off demand to fight back recession. Germany was in deep depression though Britain seemed to be still a place where some activity was seen. In these circumstances, it was necessary for Indian corporates to go and cast their net wide in areas where the population was big and where spending was higher, Mittal said. Asia, with its three billion people compared to just 750 million in Europe and U.S., was a land of opportunity, he added. The buying power and consumption levels in the region were going up, he pointed out. Mittal said India offered big opportunity in the business process outsourcing (BPO) sector for the U.S. and Europe. While America and Europe had hourly wage rates of $25-27, they could get the job done by outsourcing work to India as manpower was available here for $8-9 an hour. Several thousand Indians all over the world were serving in back-office operations. If the Indian ITES (IT-enabled services) sector grew to one million in strength, it would generate business of $25-26 billion. The saving for the U.S. or Europe by outsourcing BPO to India could be as high as $125 billion a year. Mittal said India should also try to become a manufacturing base. The problem, he reiterated, was the country's image, which needed to be drastically improved. He said so far only the telecom sector was a success story, but others such as aviation needed changes. Among the Indian states, Andhra Pradesh and Karnataka were going up on the graph with reforms and progressive policies, but they were still no match for Hong Kong and Shanghai in China, he noted.
Source: IANS
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