As top ministers extol the government's 100-day performance,
a leading international risk-rating firm has told global investors in a
confidential report that India is now the world's best growth-market bet as the
risks of doing business in the country have declined with the Narendra Modi
government having completed its first quarter.
Modi-style governance bodes well for investors who can
expect policy clarity and less red tape, said Maplecroft UK's risk analysts in
a rating note sent last week to clients, which include the world's top 400
global corporates, apart from financial institutions and think tanks. ET has seen
a copy of the report.
The firm has ranked India at No. 1 in terms of economic
opportunities for investors, whose interest in the country has spiked
dramatically since the general elections. Officials close to the development
said India has now become the fifth most requested country in terms of risk and
opportunity reports from rating agencies and risk-mapping firms such as
Maplecroft.
Risks relating to India's complex regulatory framework, red
tape and macroeconomic environment have begun decreasing already, along with
several other critical risks such as regime stability and security, according
to Maplecroft, which expects Modi to preside over improvements in job creation,
the rule of law and anti-corruption measures during his five-year term.
"The government's stability means that investors will
benefit from clarity of policy and a regulatory environment that is largely
conducive to business. In the coming year, several sectors — including
manufacturing and energy — are likely to see limits on foreign direct
investment increased.
Furthermore, delays associated with approval of investment
licences can be expected to shorten, given Prime Minister Modi's ongoing
efforts to overhaul bureaucratic procedures," Arvind Ramakrishnan, head of
India at Maplecroft, told ET when contacted about the report.
The change in the narrative is reflected in the Global
Growth Opportunities Atlas, which ranks India has the hottest growth market,
topping the world in terms of consumer potential, market potential and middle-class
growth projections. Though India ranks among the low hundreds on key enabling
factors to realise its growth potential such as physical infrastructure
business environment and human capital development, Modi's explicit focus on
these areas is expected to turn the tide in the medium term, the report noted.
According to the firm's analysis of the June-August period,
threat perceptions for investors have declined in areas such as energy security
(short term), labour-related supply chain risks, remittances and euro zone
exposure. On Modi's ability to tackle the "endemic and
institutionalised" corruption that Maplecroft said has hampered industrial
production and the development of infrastructure and natural resources in the
past five years, the firm is cautiously positive.
"Narendra Modi has promised to clean up governance by
cracking down on corruption, and expedite approvals for investment projects.
Modi is likely to achieve some success in this endeavour at the national
level,' it said, only to add that nepotism, petty bribery and other forms of
corruption in state governments remain a moderate risk.
The firm downplayed concerns about communal tensions arising
under Modi's watch, saying there is little sign he will resort to policies that
alienate religious minorities, such as amending religion-based family laws or
restricting quotas for minorities in jobs and education.
"Modi realises that pursuing divisive policies could
result in a loss of public and investor confidence in his ability to maintain
social harmony and a stable business environment," Ramakrishnan said.
Al-Qaeda's India expansion announced by Ayman al-Zawahiri
last week is unlikely to raise terror threat levels for the country, Maplecroft
told investors. "There is little evidence that groups like the LeT (Lashkar-e-Taiba)
and IM (Indian Mujahideen) share the Al-Qaeda (AQ) vision of a global
caliphate. LeT's primary raison d'etre continues to be the 'liberation' of the
state of Jammu & Kashmir from Indian rule. IM does want Islamic rule for
all of India but does not have global ambitions," the firm said in a
separate advisory to clients issued last Thursday.
Source: The Economic Times
