Risks for en­trepreneurs in In­dia re­main de­spite Modi

The China Post - - BUSINESS - BY ETI­ENNE FON­TAINE

With its econ­omy grow­ing faster than China’s and a busi­ness­friendly pre­mier who has rolled out the wel­come mat to for­eign in­vestors, In­dia may ap­pear an en­tic­ing prospect to Euro­pean in­vestors.

But as Naren­dra Modi headed to France and Ger­many, Euro­pean firms al­ready op­er­at­ing in In­dia say no one should un­der­es­ti­mate the chal­lenges of do­ing busi­ness in the world’s sec­ond largest coun­try.

Prime Min­is­ter Modi was ex­pected to use his visit to the eu­ro­zone’s two largest economies to pro­mote his “Make in In­dia” cam­paign, de­signed to en­cour- age greater for­eign in­vest­ment in Asia’s third largest econ­omy.

“I ex­pect my visit to be help­ful in ad­vanc­ing our Make in In­dia ini­tia­tive,” Modi said in an in­ter­view pub­lished by The Hin­dus­tan Times ahead of his de­par­ture for Paris Thurs­day.

“France and Ger­many have the man­u­fac­tur­ing and skill base that are use­ful to us,” he added.

With a growth rate of 7.44 per­cent last year which is ex­pected to rise to above 8 per­cent this year, In­dia is now the best per­form­ing of the world’s ma­jor economies.

With hun­dreds of thou­sands of young peo­ple en­ter­ing the jobs mar­ket ev­ery month, there is no short­age of work­ers whose la­bor costs rep­re­sent just a frac­tion of the av­er­age wages in Europe.

But poor in­fra­struc­ture, red tape and a dearth of skilled work­ers can of­ten hin­der devel­op­ment projects, warn com­pa­nies al­ready op­er­at­ing here.

In­dia is cur­rently ranked 142nd out of 189 coun­tries in a World Bank “ease of do­ing busi­ness” global league ta­ble.

And de­spite Modi’s vow that In­dia will en­ter the top 50 on his watch, ex­ec­u­tives who spoke to AFP cau­tioned against ex­pect­ing rapid change.

“The path is clear, the ob­jec­tive is clear but it takes time to turn things into re­al­ity,” said Gil­duin Blan­chard, head of op­er­a­tions for the French engi- neer­ing firm Egis, which has a 1,700- strong work­force in In­dia.

Blan­chard said it was vi­tal the gov­ern­ment makes good on Modi’s pledge to im­ple­ment con­tro­ver­sial plans to make it eas­ier for com­pa­nies to pur­chase land which is cur­rently used for agri­cul­ture.

“If you can’t con­trol the land, con­tracts will dry up and you will start to lose money,” he said.

Blan­chard wel­comed Modi’s drive to tackle cor­rup­tion but said that it had a knock- on ef­fect of de­lay­ing de­ci­sions as peo­ple try to cover their backs.

“‘ Clean In­dia’ is a good thing but at a lo­cal level peo­ple are pet­ri­fied and this adds to de­lays

in de­ci­sion- mak­ing,” he said.

Impatient for Change

A re­cent sur­vey by the In­doGer­man Cham­ber of Com­merce found that most Ger­man com­pa­nies op­er­at­ing in In­dia “hold a pos­i­tive long- term view of the In­dian mar­ket” but also iden­ti­fied a num­ber of com­mon com­plaints.

“Ease of do­ing busi­ness is looked upon as the sin­gle big­gest hin­drance by Ger­man com­pa­nies,” the cham­ber said in a state­ment to AFP.

“The sur­vey re­veals that 58 per­cent of all re­spon­dents agreed on bu­reau­cracy be­ing the ma­jor ob­sta­cle fol­lowed by the lack of in­fra­struc­ture at 52 per- cent, cor­rup­tion 45 per­cent, lack of skilled peo­ple 35 per­cent and tax dis­putes at 32 per­cent.

“Only 7 per­cent of the in­ter­viewed ex­ec­u­tives could not iden­tify any hin­drances of do­ing busi­ness in In­dia at all,” it added.

Lu­mi­plan, a French com­pany which spe­cial­izes in pro­vid­ing dig­i­tal up­dates on public trans­port, ac­knowl­edges the chal­lenges but is nev­er­the­less bullish about prospects.

While the mar­ket for dig­i­tal timeta­bles has es­sen­tially ma­tured in Europe, Lu­mi­plan sees In­dia as a new fron­tier as al­most all trans­port in­for­ma­tion is cur­rently in pa­per form.

Af­ter mak­ing its break­through in the south­ern city of Mysore, Lu­mi­plan has now won con­tracts for the bus net­work in Ban­ga­lore, one of the coun­try’s largest met­ros.

The com­pany is hop­ing to es­tab­lish its busi­ness quickly and ex­pects to turn a profit as early as next year.

“De­lays in de­ci­sion- mak­ing and prob­lems of gov­er­nance com­pli­cate things,” David Moszkow­icz, head of the com­pany in In­dia.

“But this is a po­ten­tially enor­mous mar­ket and de­spite all the lack of trans­parency, you’ve got to be in place for when things re­ally ex­plode.

“You’ve just got to have pa­tience and pru­dence,” he added.

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