India: A Lucrative Investment Destination?

Malaysia’s Construction Industry Development Board (CIDB) recently proposed $30 billion in investments in urban development and housing projects in India. India’s Ministry of Urban Development released a statement Thursday (Oct. 15) indicating that a 30-member Malaysian delegation had presented concept plans for the projects to the Minister of Urban Development, M. Venkaiah Naidu. The delegation proposed the redevelopment of the adjoining area of the New Delhi Railway Station as a mini-smart city, with an investment of $24 billion. Malaysia’s Minister of Works, Shri Haji Fadillah Bin Haji Yusof, led the delegation which was composed of “senior representatives of 12 leading government and private companies.” A plan for a $4 billion Green City Project involving housing and Ganges River cleanup projects in Garhmukhteshwar, Uttar Pradesh was also proposed during the discussions.

An Interested Neighbour

Malaysia however, does not seem to be alone in its interest in investing in India. The ministry’s statement added that Chinese companies had also expressed interest in new urban sector initiatives in India. Chairman Shri Liang Wengen of Sany Group, a Chinese MNC, led a 20-member Chinese delegation which also met with Naidu. In this meeting, Naidu emphasized the initiatives India was undertaking to improve the ease of doing business within the country. One such initiative is the Smart City Mission, which Naidu believes offers “sizeable investment opportunities in retrofitting and redevelopment of identified urban areas.”

Sany Group, China’s number one construction machinery manufacturer, pledged last Thursday to invest $3 billion in building 2,000 megawatts of green energy units from 2016-2020.  The investments are expected to assist the government’s efforts in reaching its renewable energy goals and generate 1,000 jobs.

Changing Perceptions

Malaysia and China are showing extensive interest in India just as it was named “the most attractive country for investment” by an Ernst & Young (EY) survey of over 500 global investors. The survey stated that a leading 32% of the investors ranked India as the most attractive market of 2015. EY further reported, “India is poised to become the world’s fastest growing major economy in 2015.”

However, India’s “notorious red tape” may continue to act as an obstacle that can hamper its economic growth. For 2015, the World Bank ranked India 142 out of 189 countries in its Ease of Doing Business index.

Nonetheless, change appears underway. EY’s survey indicates significant improvements in respondents’ perception of India as an investment destination from 2014 to 2015: ease of doing business has risen from 57% to 67%, political and social stability has risen from 59% to 74%, and macroeconomic stability has risen from 70% to 76%.  

As Mark Otty, an EY area managing partner states, “There is no doubt that interest in India has increased. Investors increasingly see the potential and understand the fundamentals.”