04 February 2015
Fresh from the frosty slopes of Davos in Switzerland, which once again formed a scenic backdrop to the annual meeting of the World Economic Forum (WEF), JLL India's Chairman and Country Head, Anuj Puri, reflects on India's remarkable progress under its new leadership.
In May 2013, India was dubbed a 'fragile' nation but 20 months on it's one of the world's most promising economies. If the recent IMF prediction proves correct, India's GDP growth will outpace China by 2016.
The nation's economic revival was reflected in its presence at this year's WEF. 120 delegates attended, more than China, whereas last year India was conspicuous in its under-representation.
"In 2013 there was no poster boy for India, but that's changed with Prime Minister Modi. India was frequently mentioned this year," said Puri.
The reasons behind this impressively quick turnaround, he says, can be attributed to a 'smart government clearly intent on making business reforms'.
Made in India
India is back in business, with a brand new slogan to boot: Made in India. When Prime Minister Narendra Modi came to power in May 2014, he promised a raft of reforms that would flip the nation's reliance on the IT services sector to create a manufacturing-centric economy, as China has over the past few decades.
"Multiple 'Make in India' signs and hoardings were visible all across the conference venue and this sent the country's pride barometer soaring," said Puri.
"Modi is from Gujarat, the manufacturing engine for India and he understands this sector," he added. "Much of India's vast demographic dividend is unfit for the service sector; Modi is looking to skill these people with trades for the manufacturing industry."
His commitment to support public firms with much needed financing has served as a further shot in the arm for manufacturing. Coal India received a rousing reception from the equity markets just last week.
The government aims to raise the reliance on manufacturing to 25 per cent of total economic output by 2022, up from the current 16 per cent, to create 100 million jobs. But stumbling blocks stand in the way of India realising this ambition. Manufacturing relies on serviceable infrastructure and transparent trade rules, and India is deficient in both.
"Infrastructure investment is vital and that's something Modi has promised in order to entice investors," added Puri. "Crucially, he [Modi] must follow through on his big GST reform."
As March's Budget looms, Modi is under pressure to deliver on his biggest promise of all: a reform on India's notoriously bureaucratic multi-state GST levies. If he succeeds in passing such comprehensive national tax legislation across all of India's 29 states, domestic trade will benefit and foreign investors will see the Prime Minister as a man of his word.
"Changes like the GST reforms need to be implemented. Foreign investors need to be confident that the government won't pull the rug from under them anytime soon."
The anticipation surrounding India's make-or-break year was palpable in Davos, and Puri was privy to significant media attention throughout the conference, conducting interviews with journalists who wanted to understand the situation in India: "They wanted to know what is currently happening in the country, but also how it's affected by China slowing.
"In recent years the world has had four major engines of growth: China, Japan, Europe and America. Three of these engines are slowing and there's an opportunity for India, which is revving up." Enticing foreign investors
The combination of a stable rupee, easing inflation and lower energy prices will buoy the Indian economy in the coming months and for the real estate industry, opportunity abounds in the current climate.
Increased confidence in India is driving domestic business demand, particularly in the technology sector, and office take-up from Indian corporates is rising, which means rental values are growing. This is in contrast to the last four or five years, which have been marked by excess supply and lacklustre growth.
Foreign investors may be few and far between but the US, India's biggest trade partner, is feeding its service-hungry economy on India's outsourcing sector. Testimony to the continued American interest in India, Barack Obama began a state visit as Puri touched down from Davos.
Ensuring that all of this translates into growth on the ground, however, is another matter.
"Foreign investors want to see Modi's policies in action. We will see investment levels creep up over the next six to 12 months but the majority of it will come through in 2016."
If Modi can bring his reforms to fruition, 2016 will be the year investors knock on JLL India's door: "For now, the foreign community remains cautiously optimistic and is watching India very closely, to see how the ‘Modi mania’ unravels itself. Next year I’d hope to see Modi make an appearance at Davos, which would surely be a shot-in-the-arm for us. It will not only affirm India’s new position in the global pecking order, but also hopefully encourage investors."