India 2024: How politics and regulation will transform India’s business risk and investment landscape in the next 5 years
In this webinar, UK India Business Council’s (UKIBC) Financial, Legal and Professional Services Sector Manager, Chris Heyes, was joined by Amit Narayan and James Owen from Control Risks to provide their expert insights into ‘India 2024: How politics and regulation will transform India’s business risk and investment landscape in the next 5 years’. Amit is a Partner and leads the India and South Asia business for the firm from Delhi, and James is a Senior Partner heading up the Cyber Security team at Control Risks’ London office.
We heard from Amit on the potential areas that the Indian government, under PM Modi, will look to reform, deepen, and potentially steer clear of in the near future. Following Modi’s electoral success, reforms are “potentially high on the agenda because of the political capital that Modi has to use” to press ahead with socio-economic changes, and drive legislation through the Indian Houses of Parliament.
One area of suggested focus was tax and infrastructure due to the attention-grabbing capital involved. While land and labour reforms are likely to be put on the back burner due to the high state intervention and participation required. Social programmes such as piped water to all households is a big commitment and priority of the Indian government. Though, Amit expects developments to take place gradually: “Modi is an incremental driver of change”. But he is also one to take “calculated risks” at opportune moments (such as the demonetisation drive and the abrogation of Articles 35 and 370).
Other important areas in the business and investment landscape include the Goods and Services Tax (GST) streamlining and direct tax reform. Meanwhile, divestment and subsidy rationalisation are also high on the agenda, and Modi’s anti-corruption drive is expected to continue. On the other hand, growth will continue to be led by services, namely financial technology, agro-tech, and information technology services.
However, issues include consumption slow-down following 2016 demonetisation. Additionally, start-ups and entrepreneurs are continuing to have difficulties with the regulatory environment, and credit lending is also problematic.
To reach a USD 5 trillion economy by 2024, the Indian economy needs to grow at 9% per annum (post-inflation), investment rates at around 40% of GDP, bank lending rates at 20% or more, increase its tax base, and make GST efficient and effective. To support this, the Indian government will continue to play an outsized role, with a further opening of FDI and Ease of Doing Business (EoDB) improvements – areas that UKIBC are advocating for.
On EoDB, Chris shared one of the key problems that UKIBC’s member have been facing; that is, discrepancies between states. In response, Amit alluded to the GST, citing it as one of the great drivers of the political economy which can help to realign the state and centre relationship. He noted, however, that it will take a long time to align. Privilege of the states is an issue for example. Competitive federalism is another – states are competing with each other.
Please watch the recording below for more information.
