ICEC Council organized the visit of a high level delegation of 6 Chinese Mutual Fund companies to India in November 2017. The visit was organized in association with Capvision Partners (Shanghai) Co. Ltd., a leading financial consulting firm based in Shanghai. The delegation comprised of fund managers from top asset management/mutual fund companies like China Life Asset Management Co. Ltd., WanJia Asset Management Co. Ltd. Golden Eagle Asset Management Co. Ltd., Guotai Asset Management Co. Ltd. and a few more. Collectively the fund managers managed funds of over $100 Billion. It was their first visit to India to explore the possibilities of investing in India and be part of its projected growth story. The key sectors of interest were infrastructure, Information Technology, Telecom and Pharma.
To provide the delegates a holistic sense of the investment scenario in India, ICEC organized their meeting with India’s top think tank on economy, Indian Council for Research on International Economic Relations (ICRIER).
Dr. Rajat Kathuria, Director and Chief Executive of ICRIER made a slide presentation elucidating on the economic and political background of India. The presentation shed light on the recent government reforms which tackled several issues such as black money, corruption, accountability, ease of doing business, etc. He stressed that these reforms were helping open up India for investment, and this is indicated by the improvement of India on the Ease of Doing Business Index where India went up by 30 ranks and jumped to the 100th rank. He also explained about Demonetization, the Goods and Services Tax (GST) etc., which were helping to create favorable conditions to bring in Foreign Direct Investment into India. Just last year in 2016, India received an investment of up to US$40 billion which was the highest recorded so far.
Dr. Kathuria then stated that certain sectors which were closed before for FDI such as defense, aerospace, railways etc., had opened for investment while projects like Make in India was trying to boost start-ups and spur the manufacturing sector which would ultimately create more jobs for the country. He also talked about the challenges posed to the growth of the economy in terms of pollution, lack of well-planned cities, transportation which the government is seeking to resolve by building smart cities and other infrastructure projects like railways, coastal ports etc.
After concluding the presentation, the delegates raised several questions to better understand the opportunities available and complications present in India. The first question enquired about what sectors in India attracted the most amount of FDI to which Mr. Rajat answered that the e-commerce, automobile, electronics and fast-moving consumer good sectors attracted the highest amount of FDI. For instance, recently Tencent and Foxconn both announced investment in e-commerce and electronics sector respectively in India.
The next question asked about how the process of land acquisition worked in India and how this affected the infrastructure projects. Dr. Kathuria explained that unlike in China where the government owned the land and it was easy to move forward with projects, in India, the land is owned by the private sector which means the government will have to first compensate for the land acquired from the farmers and only then can permit the infrastructure projects.
The third question inquired as to what were the different challenges posed to the growth of Indian economy, especially in regard with wage gap and labour laws. To this Dr. Kathuria answered that one of the major challenge was black money which people parked in real estate resulting in high prices, further it was hard for the government to hold people accountable as these houses were bought under fake names. However, he said that the real estate prices are expected to fall down further as reforms like demonetization were targeting the black money.
In regard with labor wages, Dr. Kathuria explained that the labor wages differed from state to state under the “Minimum Wage Act”, however the current trend suggests that the labour wages in the service sector was going up while it was going down in the manufacturing sector. He also pointed out that the labour wages in China has been steadily going up due to which many corporations were seeking to invest in other countries such as Vietnam, Cambodia, Indonesia as well as India.
The delegation is now in the process of reviewing all the information and knowledge they received during the trip and we hope that this will start Chinese investments in India’s secondary markets.