11 Feb 2014
India’s leading opposition party, the BJP, kicks off its “Chai per Charcha” election campaign this week. For investors hopes are high that a new government will accelerate India’s economic growth, which officials last week said they expect to climb marginally from a decade low. We hear from JLL’s Anuj Puri about the chances of sunnier financial climes after May’s general election.
When Anuj Puri, JLL India Country Head and Chairman, boarded his flight to the WEF summit in Davos last month he knew politics would be high on the agenda at the world’s most famous meeting of minds. India goes to the polls in May and after one of the worst chapters in the country’s recent economic history the stakes are higher than ever.
For Puri the consequences of one election outcome are clear: a hung parliament won’t be good news for investment: “Investors want conclusive action,” says Puri. “We’ve had plenty of great intent, but too much over-promise and under-delivery. Investors at Davos are saying they’ll hold off for a couple of quarters for conclusive evidence that the new government means business. If it’s a hung parliament they just won’t be interested.”
Latest opinion polls suggest the ruling Congress party is on its way out, with the opposition Bharatiya Janata Party (BJP), led by conservative nationalist Narendra Modi, set for record success. BJP will rely on its allies for a majority and Puri is hopeful coalition talks would run smoothly.
“The worry is always that coalitions fall apart when it comes to handing out ministerial portfolios and top positions. But that shouldn’t be the case if BJP and its affiliates get in – they’re close allies who have worked together for years.”
So is this short-term political uncertainty tainting the long-term outlook? Put aside pre-election political uncertainty and even the economic downturn and rising cost of living that has blighted the past few years, and India’s growth prospects are compelling.
A vast army of young, educated Indians is set to turn the world’s second most populous country into a talent powerhouse; the median age is 26 (lower than the global average and much lower than China’s); the consumer base is growing fast as a swelling middle class comes online; by 2030 68 Indian cities will have populations of more than 1 million people, 13 cities will have more than four million and there will be six megacities of 10 million plus. Huge challenges and huge opportunities abound.
Gauging belief in these fundamental growth indicators was one of Puri’s key objectives in Davos. His conclusion is positive:
“My fear was that confidence may have abated, but that’s not the case. I’d characterise the overriding feeling as ‘dissatisfied optimism’. Short-term there’s dissatisfaction, but long-term investors are far more optimistic, given the inherent potential. India is often referred to in the same breath as China – that’s how strong the fundamentals are. We certainly have not been written off.”
The net effect of the short-term anxiety and long-term confidence registered at Davos may be a zero sum gain for India. And that according to Puri is reason for relief, if not celebration:
“I asked a major Indian business man what he thought was his conclusion at the end of the summit. He said nothing really very good or bad had come out of Davos for India…and that, in the grand scale of things, is a positive result.”