Angela Lynch, the City of London’s lead on India and China policy work.
With India’s National Democratic Alliance (NDA) Government under Prime Minister Modi having completed its second year in power at the end of last month (May 2016), there has been widespread commentary, both in India and globally, on its performance. Although some questions remain as to whether progress is moving as quickly as the financial sector would like, the majority of views expressed have been incredibly positive.
The transport sector in India has received a much needed boost, with accelerated road-building and significant investments in the ageing rail network. At the same time, labour laws, have been amended resulting in changes such as increased earning potential for women and encouragement for firms to take on more apprentices. The problem of low financial inclusion levels is also beginning to be addressed. 200 million bank accounts were opened for citizens who had previously never held an account. Several affordable insurance schemes have been opened. Although the agricultural sector has been adversely affected by persistent poor weather conditions, there have been active steps taken to counter this: from the launch of a crop insurance scheme through to diversion of capital into improving irrigation. There is even good news for the legal system, where changes to the Arbitration Act are starting to bring Indian’s arbitration regime far closer to global standards than some international commentators would previously have expected.
Domestic improvements inevitably have an effect on the confidence levels of foreign investors and the above reforms have been accompanied by an active push from the NDA Government to attract foreign institutional investment into key financial sectors in India – including infrastructure and renewables. The recent passing of the bankruptcy law, in addition to bringing expectations for further strengthening of India’s debt markets, also sends a message to foreign investors of the Government’s firm commitment to improve the ease of doing business in India.
The above are only a few examples of the reform that we’ve seen in India and do not even mention reforms and changes that are in the pipeline. They illustrate that change has and is happening across India’s financial and business sectors.
Many within the global financial community have long-since considered India as a market full of potential. As was apparent from conversations at this week’s (2 June 2016) annual meeting of the City of London Advisory Council for India, this potential is now on track to be realised. Clearly there remain challenges to achieving the goals set out by the Government, and much discussion to be had over the implementation of important reforms. However, for now, there is a refreshing change of mood in discussing prospects for India’s financial markets – and no need to be cautious in our optimism.
The City of London also produces research about Indian markets, including reports on Attracting private capital for Indian infrastructure and Policy and regulatory reforms roadmap for the Indian non-life insurance industry. You can access them all here.