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Full of vigour and opportunity

In the last few years, India has caught the world's attention as one of the world's fastest growing major economies.

India's main stock markets have also been among the best performing globally as both foreign and domestic investors see the opportunities and potential of the Indian economy and corporate India.

ON Aug 15, 2017, India will celebrate 70 years as an independent country and there is much to celebrate for the world's largest democracy. Since independence, India has lifted millions of people out of poverty, become self-sufficient in food production, and made great strides in science and technology including space research. And, of course, whenever one visits India one is struck by its diversity, its rich history, culture and secular traditions.

But in the last few years, India has caught the world's attention as one of the world's fastest growing major economies, according to the International Monetary Fund (IMF). This was not the case for more than four decades in independent India. Indeed, until 1991 India was an economic laggard with all aspects of the economy controlled by the state with accompanying red tape and bureaucracy. For all practical purposes, India was a closed economy with hardly any foreign direct investment. Private enterprise was stifled and weak with little room for entrepreneurship and innovation.

The first steps to liberalise the economy were forced on the government led by Narasimha Rao in 1991 when India was in a serious economic crisis and reduced to such a point that it could barely finance three weeks' worth of imports. The economic liberalisation which started in 1991 has continued under successive governments but there has been a perceptible improvement in India's economic fundamentals since Prime Minister Narendra Modi took office in May 2014.

The present government's ground up social reform and financial inclusion initiatives, tackling directly corruption and the "black" economy, fiscal reform such as the introduction of the goods and services tax, as well as actively promoting the adoption of technology, entrepreneurship and innovation, have been well received by both local and foreign investors.

So it's not surprising that today, India has a glowing economic report card across all key indicators such as GDP growth, inflation rate, trade balance, international reserves, and stock market valuation.


According to the IMF, the Indian economy will grow at 7.2 per cent in financial year 2016/17 and further accelerate to 7.7 per cent in financial year 2017/2018. India's consumer confidence index stood at 136 in the fourth quarter of 2016, topping the global list of countries on the same parameter, as a result of strong consumer sentiment, according to market research agency Nielsen.

If investors needed more assurance that the Indian economy is likely to outperform peers over a sustained period, they can take comfort from the recent affirmation by Moody's of the government of India's Baa3 rating with a positive outlook because of bottom up social and economic reforms being undertaken by the government.

Even though India turns 70 on Aug 15, 2017, it has a large and youthful population. This demographic dividend will mean that the labour force participation rate in India will keep increasing and the new entrants to the workforce can be trained and equipped with the right skill sets. Also as the urban workforce increases at the expense of subsistence agricultural jobs and per capita incomes rise, India is expected to be the third largest consumer economy globally. According to a Boston Consulting Group report, shifts in consumer behaviour and expenditure patterns in India will result in consumption tripling to US$4 trillion by 2025.

So with such a great macro story, a strong stable government encouraging foreign direct investment, India is being viewed as a major investment destination by potential investors. Some key sectors include infrastructure, manufacturing, consumer and healthcare, commercial real estate including business parks, media, technology including e-commerce, banking and insurance. Investors include global and regional companies, private equity and sovereign wealth firms. A recent PricewaterhouseCoopers report based on a survey of 40 private equity firm partners has projected that the country has the potential to get private equity funding of US$40 billion by 2025.

My own firm, Blackstone, the leading American alternative asset management firm, established an office in Mumbai in August 2005 and has since committed US$6.7 billion to companies in India. Blackstone is the single largest investor in the private equity/real estate space in India and has helped finance over US$10 billion of hard asset creation in India. Overall we are investors in 22 companies and employ over 150,000 people in India through our portfolio companies.

India's main stock markets have also been among the best performing globally as both foreign and domestic investors see the opportunities and potential of the Indian economy and corporate India. With the Indian government's crackdown on the black economy we are already seeing a shift in the composition of savings in the country with a larger proportion of savings being in financial assets instead of gold and unaccounted for "black" money. This augurs well for India's financial markets as much of these financial assets will be invested in equities, bonds and mutual funds.


However, investing and doing business in India is not without its challenges. It is still a difficult place to do business because of a preponderance of regulations, bureaucracy and administrative bottlenecks which mean mean that in the latest World Bank's Doing Business rankings India is ranked 130. The good news for investors is that Prime Minister Modi's government is determined to do whatever is necessary for India to steadily climb up the global rankings of Doing Business.

The state banking sector in India, which accounts for almost 70 per cent of all lending, has been heavily weighed down by non-performing assets which have hindered its ability to finance much needed new investments. A new insolvency act and upgrading the quality of asset reconstruction companies by allowing 100 per cent foreign equity participation will hopefully reduce the level of non-performing assets on bank balance sheets.

As India turns 70, it is well on course to be a major global economy But to achieve its full potential it needs investment and expertise from foreign investors. India's doors are open for business and the rest of world is actively engaged with India in a journey which should be mutually rewarding.

  • The writer is chairman of Blackstone Singapore and a vice-chairman of the Singapore Business Federation where he chairs the South Asia Business Group.