'The assessment of most people is that there is a stable economic and political environment in India and that is attractive to investors.'
Nick Allan, CEO of the London-headquartered global risk consultancy firm Control Risks, says there has been a real shift in the past 18-24 months in terms of client interest towards India as an investment destination.
In a one-on-one interview with Asit Ranjan Mishra/Business Standard in New Delhi, Allan says the sentiment is very positive towards investing in India.
How do you see the business environment changing in India with the global economic situation?
A number of things are happening in the global economy which has made a lot of our clients certainly look at their supply chains and reassess.
The headline move was Foxconn investing in Tamil Nadu.
It was a small part of iPhone production, but it's big shift when they were so concentrated in China.
The other thing is the search for relatively predictable growth because to find a fast-growing economy where you can also have some confidence, political stability and currency stability, particularly at this moment, is not easy.
The obvious and much-created demographic statistics of India obviously mean that it's hard to ignore a market that's growing fast and has potential that India has.
We've seen a big increase in the number of clients asking us about investment opportunities in India.
How do you assess the risk parameters in India?
From the risk perspective, clients are worried about currency risk, inflation, and political stability.
Federal elections are coming up next year.
I think that sort of political stability risk has receded quite a lot.
Our advice to clients always is that you can understand the federal part of India but if you are investing, you absolutely have to understand the state politics and how that plays out.
In the manufacturing sector, clients are keen to understand the depth of talent pools, particularly in complex manufacturing.
There's always regulatory risk the world over.
People will look at how India is going to implement the new data regulations because so many companies are having to wrestle with the challenges of data regulation.
But there has been a real shift in the past 18-24 months in terms of client interest in India as an investment destination.
There is a lot of positivity around India. Is India's rise now inevitable or do you see any major risk one should be watchful of?
We have been here before in terms of excitement around India's economy and the promise has always existed.
Some things are different this time. Economic stability and some of the liberalisation that previously been talked about actually started to happen.
Political stability is helpful. Nothing is inevitable.
It's a competitive world.
India is not the only country with opportunity. But the sentiment is very positive towards investing in India.
India has this persistent border conflict with China and as the economic fortune of China declines, it is believed it will become more assertive geo-politically.
Do you see that as a risk for investments in India?
China has obviously invested significantly in its military capabilities.
Do we think that the border skirmishes are going to lead to a conflict situation between China and India? No, we don't.
Are there going to be skirmishes, flare-ups, and challenges? Absolutely, it has been the case for a number of years.
China and India will be locked in competition and cooperation at the same time.
China is a competitor, but at the same time there are a lot of economic ties. That's well understood.
Moody's recently said curtailment of civil society and political dissent compounded by rising sectarian tension support a weaker assessment of political risk and the quality of institutions in India, citing violence in Manipur as an example.
Do you agree with that assessment?
Companies are concerned about social challenges. The incident you sighted was picked up by international media.
Those kinds of tensions never portray a positive image of any country, India is not unique in having some of those social tensions.
But companies do want to understand the overall political trajectory of India.
What is important for investors is political stability, independent judiciary and rule of law.
So what do you tell the prospective investors? Is it a risk that they should be worried about or is it a manageable risk?
Companies feel this is a risk that can be managed.
It depends where you are and what you are doing in terms of how social risks play out.
The assessment of most people is that there is a stable economic and political environment in India and that is attractive to investors.
Feature Presentation: Aslam Hunani/Rediff.com