Narendra Modi announced his aim to liberalise foreign investment rules in India on Tuesday. For example, this week’s measures will make it easier for foreign businesses to win automatic approval for investment plans. They also ease up the amount of equity foreign portfolio investors can hold in Indian private sector lenders, as well as regulation around the real estate, construction and retail sectors.
“Today’s FDI related reforms will touch 15 sectors, India is unstoppable on the path of economic progress [and] . . . wants the world to see the tremendous opportunities India offers,” Modi commented on Twitter.
General consensus is that some long-awaited pro-business reforms are much needed. “India has fantastic companies that have done well in spite of the government rather than due to the government,” said Ayesha Akbar, manager of the Fidelity Multimanager Growth Portfolio.
Parliamentary reforms in areas like tax and land acquisition were delayed this year. “Modi came in at the right time,” said Akbar. “But in the last 18 months reforms have been slower than anticipated. It is time for the government to start delivering on reforms,” she added.
“There’s also a lot that can be done with regards to financial services, it depends on the political situation. It’s a situation to be closely watched,” said Akbar. According to Akbar, while tech could continue to do well, there’s still a reluctance to enter into energy and materials related areas, (where reforms are needed).
“One of the downsides is that India is more expensive than the average emerging market country”, continued Akbar. “And one of the risks is that it’s dependent on foreign investment, and there are issues around the current account deficit,” she added.
Stephen Russell, member of the emerging markets core equity team at Lazard Asset Management, said: “The Indian market is one of the most diverse and very attractive, but there are issues of overcapacity.”
