India, the world’s second most populous country, may be having a long-standing border dispute and other differences with China, but that isn’t preventing the South Asian giant from seeking better economic ties with its larger neighbor.
New Delhi is eyeing a share of Chinese outbound investment, particular in infrastructure projects such as roads and power plants, in the coming years, with officials holding out the hope for simplified approvals and improved foreign direct investment (FDI) policies under a new government.
Authorities also aim to lure more investment and expertise from Hong Kong, with banks in the city seen playing a crucial role in project financing.
Narendra Modi, the newly elected leader of India, is expected to make a big push to bring in foreign investment and fast-track key infrastructure projects, replicating his success in Gujarat, the state he has governed for more than a decade.
Betting on a Modi win, foreign investors have poured more than US$16 billion into Indian stocks and bonds in the past six months and now hold over 22 percent of Mumbai-listed equities, Reuters noted in a May 17 report.
“Investment in infrastructure sector is expected to be about US$1 trillion under the nation’s five-year goal,” Sanjeet Singh, a director at India’s Ministry of Commerce and Industry, told EJ Insight.
The Chinese are extremely keen to participate in roads, power and telecom in India, he said.
Under India’s 12th five-year plan, the country aims to have infrastructure investment of more than US$1 trillion between 2012 and 2017 to enhance the nation’s competitiveness. Almost half of it is targeted to come from private investors.
Prashant Agrawal, Indian Consul General to Hong Kong and Macau, noted that “infrastructure projects such as roads, ports, power plants and expressways are still under development in India, and many of them allow 100 percent foreign investment”.
The South Asian nation is looking at opening up more industries, which will help bring in more foreign investment after earlier initiatives in sectors such as retail and telecom, as well as logistics and commodities trading.
“The Chinese government has announced an investment of over US$500 billion in the next five years in overseas destinations. We hope India would be one of the destinations as infrastructure is a prime sector in our country,” Singh said.
Western Europe has topped FDI in India in recent years, taking up 40.5 percent of the total foreign direct investment in India from 2007 to 2012, followed by the US with 30.2 percent. Meanwhile, China accounted for only 4.1 percent of the FDI in India over the same period, Singh said.
Hong Kong is seen as an ideal place for India’s infrastructure financing, with Singh pointing out that the city has the most Indian banks outside India and that it is home to more than 1,500 Indian companies.
“We hope Hong Kong’s investment in India will be significant in the coming years,” the official said. Since April 2000, Hong Kong’s total direct investment in India was US$1.21 billion, just a small fraction of the city’s US$214 billion such investment worldwide.
The Confederation of Indian Industry said on Monday that “despite two decades of economic reforms, India continues to falter on varies sub-indices such as starting a business, dealing with construction permits, getting electricity, registering property, paying tax, cross-border trading, enforcing contracts or resolving insolvency.”
Of the four issues — ineffective land acquisition process, unfavorable taxation regime, high cost of starting business, and complicated and time-consuming contract enforcement process — that are highlighted, 90 percent of respondents in a survey believed that the tax authorities are not proactive in promoting investment, the industry association said in a report after conducting a survey among Indian corporates on the prevailing business regulatory environment in the country.
India plans to expand its visa-on-arrival program to more countries and regions, including China and Hong Kong, in order to attract more tourists and other visitors and boost commerce. Authorities are also working to boost air links.
“We are going to add more flights between India and China and Hong Kong; they are going to be announced soon,” Agrawal told EJ Insight.
“In India, a major drive is also underway to build facilities for tourists such as more hotels and improving connectivity through expansion of road network and more trains targeted at foreign tourists. A unique example is the Mahaparinirvan Express, a train that takes tourists to all major Buddhist heritage sites over a week and provides all amenities of boarding and lodging,” he said.
Besides traditional tourism, India is also developing the niche medical tourism market. “We have specialty hospitals in the country offering affordable healthcare which an increasingly large number of people, especially from the West and Middle East, are using for medical tourism,” the Consul General said.
The Indian government has taken quite a number of initiatives in the public health sector, focusing on improving medical infrastructure and rural health facilities, as well as encouraging FDI for medical services. Moreover, authorities are prodding hospitals to obtain international standards accreditation to ensure standardized quality and affordable healthcare services.
New Delhi is also encouraging medical tourism by offering tax breaks and export incentives to practicing hospitals. The Ministry of Tourism, meanwhile, has lent a helping hand by facilitating medical visas for longer periods.
According to a report from a business research and consultancy firm RNCOS, India’s medical tourism industry is likely to register compound annual growth rate of more than 20 percent during 2013-2015.
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