Modi courts investors with plans for US$5 trillion economy

[NEW DELHI] India is working towards a US$5 trillion economy by 2025, Prime Minister Narendra Modi said at the opening session of the World Economic Forum in Davos, as he courted global investors to Asia's third-largest economy.

"India is removing the red tape and laying out the red carpet," Mr Modi, the first Indian prime minister in two decades to attend the high-level forum, said in his address on Tuesday.

"Almost all areas of our economy have been opened to foreign direct investment," he said.

"More than 1,400 archaic laws that were an obstacle to doing business" have been abolished in the last three years.

Mr Modi is spearheading efforts to attract foreign investment to kick-start growth in India's US$2.3 trillion economy, which is forecast to expand at the slowest pace since 2014 this year. His government eased restrictions this month on foreign direct investment in several sectors, including single brand retail, real estate brokerages and power exchanges. He allowed overseas airlines to invest in state carrier Air India Ltd.

Earlier Mr Modi relaxed rules on investment in defence, construction, insurance, pension and other sectors resulting in the highest ever foreign investment inflows in the year ended March 2017.

He warned that globalisation "is shrinking" as countries became more inward-focused.

"Although everybody is talking about an inter-connected world, we must accept globalisation is slowly losing its lustre," he said.

"Trade agreements have come to a standstill. Growth in the global supply chain has also stopped."

His Davos address followed US President Donald Trump's decision to impose tariffs on imported solar panels and washing machines, in his first major protectionist move to level a playing field he says is tilted against American companies. Mr Trump is scheduled to speak at the World Economic Forum on Friday.

Mr Modi's sweeping policy changes, including a ban of high denomination currency bills and a botched good and services tax roll out, have imperiled revenues and placed further strain on the budget deficit, which the government is aiming to bring down to 3.2 per cent of gross domestic product in the current fiscal year. The annual budget on Feb 1 is an opportunity for Mr Modi to revive growth, which the IMF (International Monetary Fund) sees at 7.4 per cent in 2018.

The prime minister was voted to power in 2014 on the promise of cutting graft and creating jobs, winning the biggest mandate in three decades. He got a shot in arm when Moody's upgraded India for the first time in 14 years and was further buoyed when India made it into the top 100 in the World Bank's Doing Business rankings last year, narrowing the gap with competitor China.

BLOOMBERG