Getty Images

India Promises Investors More Red Carpet, Less Red Tape

Sept. 25, 2014
India's business-friendly new leader wants to revive his country's flagging economic fortunes by kick-starting a manufacturing sector long eclipsed by that of neighboring China.

NEW DELHI - Prime Minister Narendra Modi pledged Thursday to slash red tape and harness the benefits of a huge young population as he launched a campaign to attract global business to manufacture in India.

India's business-friendly new leader wants to revive his country's flagging economic fortunes by kick-starting a manufacturing sector long eclipsed by that of neighboring China.

"We don't need to invite the world to India, they are ready to come. We just need to give them our address," Modi said at the launch of his 'Make in India' campaign.

"India is the only country in the world that has the power of democracy, demographic dividend and demand," he added, saying India's young people stood to benefit from manufacturing growth.

Modi's right-wing Bharatiya Janata Party swept to power in May on a mandate to revive the economy, which is going through its worst slowdown in two decades.

The government has already relaxed rules for foreign investors, eager to create jobs for the millions of Indians who enter the employment market each year.

But any company seeking to do business still has to contend with byzantine regulations and a stringent tax regime.

Modi said he had been "pained" to hear stories of businesses abandoning India because of an unfavorable business climate.

"I asked my staff, 'why are government forms so lengthy?' And there was no reason," he told an audience of business leaders including Reliance Industries head Mukesh Ambani, India's richest man.

Commerce Minister Nirmala Sitharaman said there was "huge untapped potential" for manufacturing in India, which accounts for just 15% of gross domestic product (GDP), far less than many other Asian nations.

"India has long been associated, unfortunately, with red-tapism and cumbersome rules and regulations. We are conscious of such perceptions," Sitharaman said.

"We want to change that. Red tape will be replaced by the proverbial red carpet," she said.

The World Bank recently placed India a poor 134th among 189 economies in its ease of doing business report while regional rival China ranked 96th.

British mobile giant Vodafone is locked in a $2.4 billion tax row with the Indian government while Finnish company Nokia had its plant in India seized over a tax dispute.

Although it has moved to open the insurance, defense and transport sectors to foreign investors, the government has also closed the door on foreign supermarket chains such as WalMart, which had been hoping to enter the Indian market.

Red Carpet for Investors

Kenichi Ayukawa, head of Indian car manufacturer Maruti Suzuki, said India had the potential to be a world leader in the sector, but was being held back by red tape and other issues.

"Costs of production in India increase because of various government policies, procedures, regulations and the way some of the laws are implemented," he said at the launch, adding he was confident such barriers to growth could now be removed.

Modi launched the campaign hours before he was due to fly to the United States, where he will meet heads of businesses including Google and PepsiCo on an official visit heavily focused on attracting investment.

The government has identified 25 sectors including automobile, aviation and construction that have potential to attract investment.

A new web portal,, will answer all investment-related queries from business entities, while a revamped Invest India unit will act as the first reference point for guiding foreign investors on all aspects of regulatory issues.

The Associated Chambers of Commerce and Industry (ASSOCHAM), which promotes trade in India, said the initiative would "go a long way in instilling trust and confidence among all sections of the industry."

The government's manufacturing push comes at a time when many global companies are seeking an alternative to China as costs and risks there rise.

"India can become an alternative to China for global manufacturers," Anjan Roy, an independent economist based in Delhi, told AFP.

"We have a large domestic market that is being largely serviced from imports.

"Manufacturing has been lagging for a long time, growth in this sector has been marginal and sometimes it has even slipped into the negative zone. So this push by Mr Modi is very timely."

The Asian Development Bank said Thursday that India's economy showed promise of a "turnaround" following Modi's election, forecasting GDP would grow by 6.3% next year, compared to an earlier projection of 6.0%.

by Abhaya Srivastava

Copyright Agence France-Presse, 2014

About the Author

Agence France-Presse

Copyright Agence France-Presse, 2002-2024. AFP text, photos, graphics and logos shall not be reproduced, published, broadcast, rewritten for broadcast or publication or redistributed directly or indirectly in any medium. AFP shall not be held liable for any delays, inaccuracies, errors or omissions in any AFP content, or for any actions taken in consequence.

Sponsored Recommendations

Voice your opinion!

To join the conversation, and become an exclusive member of IndustryWeek, create an account today!