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‘US should not miss boat in India infrastructure investment’

June 03
02:34 2011

Suresh Kumar, Assistant Secretary of Commerce and Director General US and Foreign Commercial Service

NEW YORK: The $1 trillion infrastructure story is the big investment story from India over the next five years, of which US investors have at least a $300 billion opportunity if they care to not miss the boat, was the message that came out of the opening session of SUITE 2011, the second summit of the Indo-American Chamber of Commerce held at Hotel Pennsylvania in New York City May 25-26.
The two-day event brought out the scope of further Indo-US collaborations focusing on potential areas of mutual interest and facilitating matchmaking sessions between companies of the two countries.
While India seems to be saying that American companies need to adapt to Indian circumstances to be able to partake in its growth story, American investors appear to be hesitant to enter the Indian market more aggressively without the right policy mechanisms in place.
Consequently, although it is the second most populous nation in the world, India ranks 17th as a US export partner. Still, the increase in Indo-US bilateral trade from $34.4 billion in 2009 to $45.01 billion in 2010 – an impressive 30% growth – reflects the ongoing success of the strategic partnership between these two leading economies of the world.
Speaking on the sidelines of the conference, Chief Guest Suresh Kumar, Asst Secretary and Director General of US and Foreign Commercial Services, US Dept of Commerce, told India Post there was tremendous interest of US businesses in India post-Obama India visit. But while there was tremendous amount of engagement on the ground, the government can only provide the infrastructure for furthering trade but it was for the businesses to consummate trade.
Kumar further said there was no hesitation at all in the minds of American businesses over investing in India. “The extent of US FDIs in India is obviously many times more than what India has in the US. But if you need to see more investments, India needs to open markets in different sectors. American firms are ready, willing, able and want to engage (with India), but India’s policy mechanisms should be able to attract American businesses.”
Kumar said he has met with several Indian ministers of various sectors such as oil, civil aviation, etc. “Investments follow business opportunities and there are business opportunities in India… so why wouldn’t companies engage or invest… they would if the circumstances are such that we are allowed to invest and engage in an open manner. That is something the Indian government needs to introspect on and look at how they will create the circumstances or build policy mechanisms that will attract greater trade.”
Addressing the inaugural session of the conference, IACC president Gautam Mahajan said Indian investors are realizing that that trade and investment is a two-way street and that they can’t be global players without investing in America. Indian investors have been, over the past few years, making significant investments in the US, the latest being the $200 million Greenfield investment in Kentucky by Uflex, India’s largest flexible packaging company.
The US, Mahajan said, has a great opportunity to be part of the $1 trillion investment opportunity in infrastructure. “The US always misses the boat by often changing their rules of overseas investments,” he observed. “By the time they get their act together others would have taken their business to India.
Further, he said, America can easily get $300 billion of India’s infrastructure requirements if they can come up with the “next practices” by coming up with ideas for building Indian cities in the next 15 years. “Sell us the “next practices” and beat other countries who are selling the “me too” practices,” Mahajan said challenging potential American investors.
“There was a time when India was looked at as only a country that takes money,” said vice president IACC S.K. Mitra, in his brief remarks. “But now we are into major acquisitions and mergers across the world and Indians are all over the place; it’s now truly a two-way traffic.”
Indians, he said, have become hyper active and restless and India was on a growth path. To take advantage of India’s growth story, global investors need to look at its unique aspects that work in that country, Mitra felt. “American businesses always talk about what’s not there in the rule book… one of the beauties of investing in India is one always makes a profit; if they don’t it has to be really an exception,” he said.
Saud Siddique, Joint MD of SREI Infrastructure Finance Ltd., said India was undergoing remarkable transformation and the reform process has by no means ended. India’s infrastructure investment needs in the next five years are $1 trillion and even if that amount is debatable, arguably the figures are enormous, he said. “The (Indian) government believes these investments will happen,” he stressed. “They are not figures on the fly. Infrastructure investment in India today is akin to the industrial revolution of the ’80s.
There are indeed issues and challenges in this sector like land acquisition, but overtime they would be tackled successfully and these investments would become sustainable, he said.
Several European and Asian countries are already taking advantage of these opportunities in India and it would make tremendous sense for American companies to come in since they have the experience and expertise, Siddique pointed out.
Challenges in infrastructure sector
As a veteran of the infrastructure industry, Saud Siddique said there were many challenges in the Indian economy, still “there must be something right or we wouldn’t have the average 8% growth rate over the last decade.”
Siddique said corruption and enforceability of law are the two biggest challenges, but they were not unique to India as many developing countries like China, Mexico and Brazil also faced the similar challenges.
“By no means,” Siddique warned, “entering the Indian market is not for the faint of the heart. But the opportunities are there for the innovative, the street smart, and those investors who can think out of the box.”

Land acquisition, he said, was another major challenge since displaced farmers whose farmlands have been acquired do not find employment in the absence of labor intensive industries. These are the different issues that the government is seriously thinking on, Siddique said.
Throwing an entirely different light on Indo-US trade challenges, Glenn Stone, Principal, Head of Infrastrcuture, Grant Thornton, threw interesting insights which drew out the similarities and dissimilarities in the nature of the two economies. “Both countries are facing an infrastructure deficit running into trillions of dollars,” he said. “But the similarly ends there.”
Recognizing that infrastructure was the bedrock of growth the Indian government came up with the extremely innovative Public-Private-Partnership (PPP) model opening up the largest infrastructure market in the world. The US, meanwhile, was not investing in infrastructure, he said. “It’s going backwards. They haven’t invested in 30 years in this sector and the country is facing a real infrastructure crisis.”
While about 100 countries across the world use the PPP mode of investment, the US came into this very late, with only 30 of its states having passed the PPP legislation, Stone said. The federal government in the US was not involved in the delivery of public services, including education. “The US is facing some very big problems in infrastructure because the federal government’s involvement in these services is minimal,” Stone added.
Another big difference in the US as against countries like India was that there is a lot of money chasing very few projects. “In India it’s the other way around,” he pointed out. “In the US, there is at least $100 billion in infrastructure fund sitting with no projects to spend on.”
Adding to these observations, Siddique said the reason for this complacent situation in the US was because infrastructure was not a matter of life and death. “So there are no hard decisions being taken unlike in India and China where infrastructure is a matter of life and death for their developing economies.”
India, Siddique said, needs to educate potential investors in the US to get them out of their mindset about ground realities in India.
Symbiosis for Success
A research publication titled ‘Symbiosis for Success: India-US Bilateral Trade and Economics’ by Grant Thornton, released on the occasion, summarized that winds of change in America would further open up its economy, rationalize tax and regulatory structures and embrace Indian companies more candidly, more positively. The dire need of investment in sectors such as infrastructure, healthcare and education would essentially invite participation from private companies and the time was apt for both US and Indian companies to make the most of these opportunities early on.

SRIREKHA CHAKRAVARTY
India Post News Service

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