A Dynamic India needs investment in many sectors. Demographic demands for goods and services are causing a competition for investment across sectors. Government priorities reflect political and economic realities of demand. Investment is sought to meet priorities and required growth. What factors are key and how should India decide investment priorities for the near and long term?
EkaLore is providing analysis and notes on core subjects on a Dynamic India. We provide outlooks on subjects affecting colossal global enterprises and practical steps for export-oriented enterprises.
Headlines across any business media look to continued demands for investment across sectors of the Indian economy. Energy, food, transportation, semiconductors, telecommunications/networks, electronics, education, health care, … and the list goes on. EkaLore has previously looked at under-performance in external investments (VI, Disney, Amazon), and growth in domestic and global markets (pharmaceuticals, refining, computer games, outsourcing, payment and remittance processing, social networks, ecommerce). Success comes with targeted investment, shared goals, and markets riding the waves of change.
“Technology”, in the broadest sense, is liked to many of these success stories – and to failures. Human development (education, skills training, organization) is clearly behind export services (like outsourcing) and location of development labs for colossal enterprises (computer tech, vehicles, pharmaceuticals, emerging AI). All the successes have also had substantial investment (foreign direct, government, and re-investment by enterprises). These are common success factors though not the only key factors.
Ongoing success in outsourcing services is the result of decades long investments in the human capital and services exports infrastructure. The favorable foreign currency earnings and large employment are the results of nurtured investments.
The current success of the refining sector comes from using their capacity. Support for domestic and export markets is a result of risk-taking investment. Investment built capacity and business capability. The world events providing crude oil feedstocks, at prices assured of making margins, were a happy timing for India. The capacity utilization of planned capabilities to service domestic and export was good for the Indian economy. The high utilization came in a period of global instability and favorable energy prices, government willingness for favorable policy, and global demands for the capabilities of Indian refineries. The investment decisions nearly 10 years prior was a risk that has paid off.
Continued growth in other sectors demands larger investment. Attracting electronic products assembly helps by large job creation in a sector. Attracting green energy transformation manufacturing looks to capture margins and growth in India(batteries, electric vehicles, electric distribution infrastructure, and more). The scale of investment challenges even economic powers like Germany, the UK, and USA. Clearly even foreign direct investment must be aimed at priorities. Setting the priorities is complicated by political fights over geography, history, and favored industries.
The investments seeking foreign parties are constrained by government bureaucracy, state rivalries, and limited local capital. A sad truth is even the capital of successful Indian global enterprises would be insufficient to fund initiatives to build a state-of-the-future semiconductor fab, an mRNA-pharmaceutical production facility for export, and indigenous aircraft production. Government supports are factors in attracting foreign partners, equity capital, or long-term debt held externally.
Thus, government priorities will often drive commercial investment priorities across multiple topics. The high growth colossal global tech enterprises must be able to realize long term profits to confirm investment funding and technology transfers. Colossal enterprises delve into high level topics of macroeconomic policy, intellectual properties, labor mobility, and clear market access roles. Everyday investment by the supply chain enterprises, materials suppliers, and production technology holders are directly affected by those same policies.
For example, Indian rules create unneeded difficulties for importing computer gear, prototype production equipment, and moving in production from an existing foreign production line. Delays in asserting the rule-of-law, coordinating multiple layers of permits, and protecting technologies also raise the perceived risks and costs of investment spend. The priorities of investments don’t drive the competition for investment without clear government priorities and involvement. Government priorities must be matched by actions across Indian society to reduce perceptions of risk and layers of overhead costs.
Foreign parties will perceive these risks translated to higher requirements for greater investment returns. Unless these risks are reduced these barriers will climb faster than expectations affected by inflation in developed countries. The result of extra rules are not protecting India – they are reducing the acceleration needed to efficiently reach a Dynamic India’s goals. To compete for the desired, and required, foreign investment will require adjustments to global perceptions.
A Dynamic India will be successful if it creates favorable conditions for investment into the industry sectors chosen as priorities. Sectors without likely successes must reduce investment expectations and enable external buys (specialized defense goods, machine and production tooling, specific green energy transformation technologies). Continued external investment requires known economic, political, and legal preconditions. A Dynamic India’s continued successes will follow effective continuity of those favorable conditions.
For more of EkaLore's analysis and notes on a Dynamic India and global business see http://www.ekalore.com/india-business
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