UK firms are confident about the Indian economy and their long-term goals for doing business in India, despite the fact that the country’s economic growth is in a slowdown.
According to a new report from the India branch of the Confederation of British Industry (CBI), “the general mood of UK firms invested in India is upbeat.”
The Indian economy is experiencing an unprecedented level of foreign direct investment.
Image: Mumbai with Gateway to India. Gateway means a point or passage through which one has access to a region. (Credit pixabay-1370023)
The Indian economy is one of the fastest-growing in the world. However, the pace of growth has slowed over the last five quarters – with the lowest point being 5.7 percent growth in the first quarter of this financial year.
UK firms say that the ‘worst is over’
The CBI India report draws on data garnered from surveys, “ministerial roundtable” discussions, and one-to-one meetings with more than 100 UK firms in India and the UK between April and September 2017.
It gives an overview of the Indian economy and business environment and concludes that UK firms see the country’s current slowdown as “short-term pain” and expect it to bounce back at the end of the current financial year.
The report conveys a sense among UK firms that the worst is over, following the effect of Prime Minister Narendra Modi’s controversial demonetization of 500- and 1,000-rupee currency notes and the tax restructuring that collapsed 40 different taxes into one Goods and Services Tax (GST).
IMF say Indian economy outlook is ‘solid’
The International Monetary Fund (IMF) cite the “double dose” of restructuring as the main reason for revising downwards their recent projections of India’s economic growth.
In their latest World Economic Outlook (WEO), the IMF project that India’s economic growth for 2017 will be 6.7 percent and 7.4 percent in 2018 – which is 0.5 and 0.3 percent lower than the projections they made earlier this year.
However, IMF Managing Director Christine Lagarde told a recent press conference that “India is for the medium and long-term on a growth track that is much more solid as a result of the structural reforms,” and likened the “monumental” restructuring to fixing the roof while the sun is shining.
She said that the IMF hope that this will “will actually deliver the jobs that the Indian population, particularly the young Indian people, expect in the future.”
At present, less than 2 percent of job seekers in India are successful in their applications: out of every 30,000 people who are applying for jobs every day, only 450 are getting them.
India’s ‘stunning improvement’ in ease of doing business
The CBI India report notes that the slowdown in the Indian economy “was expected,” and there are no doubts about its underlying resilience.
While the restructuring “may have rocked the boat a bit,” the Indian economy is experiencing a “record” level of foreign direct investment, reaching an “all-time high of $60.1 billion in 2016-17.”
Of the G20 nations, the UK was the largest investor in India during 200-2016, only giving way to Japan in the third quarter of 2016-2017.
India’s “stunning improvement” in the World Bank’s ease of doing business ranking will also further enhance foreign direct investment from the UK, says the report. The World Bank’s ranking for 2018 shows that India has climbed 30 places from 130 to 100.
In addition to a raft of financial and legislative recommendations for India’s government, UK firms also urge them to keep to their promise of “total electrification by 2019.”