On Thursday, after a full day of meeting American CEOs, Prime Minister Narendra Modi declared that India was open for business. He had said exactly the same thing a year ago on his first visit to the US.
In between these two trips, the “open for business” was supposed to turn into “doing the business.” Somehow that hasn’t happened at the pace foreign investors want. Modi heard complaints about India’s sluggish bureaucracy, its dismal infrastructure, its scary tax regime, its intellectual property regime and its slow judiciary at his round tables and later at dinner with 47 CEOs of Fortune 500 companies.
While the Indian-born chef Vikas Khanna may have excelled with his amazing menu, the pomegranate sangria didn’t quite mellow the hard-nosed captains of American capitalism. Many of them have experienced India’s spaghetti bowl of rules and regulations and come away with indigestion.
Host of obstacles
Fortune magazine editor and moderator Alan Murray was quoted as saying on Twitter that the “CEOs were not shy in responding. They praised the prime minister’s efforts but highlighted a host of obstacles”.
The Indian industry titans accompanying Modi tried to strike a more positive note and balance the negative. While admitting India hadn’t yet become a dreamland for investors, they stressed the bureaucracy was in fact changing, a new competition among Indian states for investment was growing and the Indian economy was performing solidly. Their subtext: If you don’t invest in India given the bleak global situation, where will you go?
It is true that the Chinese economy is going through a serious adjustment, Europe is dragging, Africa suffers from shortage of skills and no other Asian country can be a “continent of consumers” – to quote Sunil Bharti Mittal – as India.
To Modi’s credit, he listened to the Americans carefully and seemed to take the complaints on board without defensiveness. He knows he has to fill the gap between India’s promise and performance or his so-called magic will evaporate. As a keen US analyst of bilateral relations noted, “He has only himself to blame for setting the expectations so high.”
Modi had made promises last September – red carpet instead of red tape, a simplified tax regime, down with archaic laws, e-windows for paperwork and an eager bureaucracy. Come September, the performance is being judged.
Worrying indicators
The general sense of enthusiasm he generated in the United States a year ago ‒ from government to corporations ‒ has thinned somewhat. Privately, many say Modi’s incremental path is opposite to what was expected from his historic mandate. He lost the honeymoon period worrying about this or that state election.
Publicly too, the Americans are more open about what they perceive as problems in the commercial relationship. US Commerce Secretary Penny Pritzker reminded a packed audience at the Carnegie Endowment hours before the Strategic and Commercial Dialogue that India was 186th out of 189 countries ranked by the World Bank in enforcing contracts.
Prtizker said the bankruptcy regime was “outdated,” contracts were “frequently reinterpreted” and that Indian courts took generally five years to settle a commercial case. Doing business in India was a challenge. It was “absolutely critical” to get the system modernised, she said.
Nirmala Sitharaman, minister of state for commerce and industry, tried to blunt the offensive but statistics, especially those collated by the World Bank, can’t be disputed in this environment. She said India “stands out in the global economy” as a stable performer. On specifics, she said a new layer of commercial courts was being added, that a committee was looking into Indian laws to find that should be removed completely and that 98 steps had already been identified which the states were in the process of implementing.
But American CEOs generally stuck to their narrative. David Cote, chairman and CEO of Honeywell who has 13,000 employees in India and knows the country well, said India was “at the cusp of another reawakening” but “you can understate the difficulty of doing business in India”.
Cote told the same conference: “The bureaucracy is stultifying. It is as if you took the British bureaucracy doubled it and then added ten times more people. It makes getting anything done impossible. The bureaucracy needs to speed up, it needs to focus on helping business and it [needs to be] focused on decisions.” He added that the Modi government was trying to make all that happen.
Sources of friction
Michael Burke, chairman of AECOM, a $19 billion infrastructure firm, said the poor infrastructure was a huge source of “friction” on the Indian economy and given the “fragmented nature of Indian democracy”, it could be hard to complete projects on time. He was implying that court cases related to land acquisition could go on for years.
To turn the narrative around, Modi needs one big American project to start in India soon to showcase his policies. But the problem is that unlike other countries the US government does not have dedicated state funds it can channel towards countries. It doesn’t build railways like China or dams as the Soviets used to.
It will have to be the US private sector that will help Modi realise his development agenda. So far, they are waiting and watching.
In between these two trips, the “open for business” was supposed to turn into “doing the business.” Somehow that hasn’t happened at the pace foreign investors want. Modi heard complaints about India’s sluggish bureaucracy, its dismal infrastructure, its scary tax regime, its intellectual property regime and its slow judiciary at his round tables and later at dinner with 47 CEOs of Fortune 500 companies.
While the Indian-born chef Vikas Khanna may have excelled with his amazing menu, the pomegranate sangria didn’t quite mellow the hard-nosed captains of American capitalism. Many of them have experienced India’s spaghetti bowl of rules and regulations and come away with indigestion.
Host of obstacles
Fortune magazine editor and moderator Alan Murray was quoted as saying on Twitter that the “CEOs were not shy in responding. They praised the prime minister’s efforts but highlighted a host of obstacles”.
The Indian industry titans accompanying Modi tried to strike a more positive note and balance the negative. While admitting India hadn’t yet become a dreamland for investors, they stressed the bureaucracy was in fact changing, a new competition among Indian states for investment was growing and the Indian economy was performing solidly. Their subtext: If you don’t invest in India given the bleak global situation, where will you go?
It is true that the Chinese economy is going through a serious adjustment, Europe is dragging, Africa suffers from shortage of skills and no other Asian country can be a “continent of consumers” – to quote Sunil Bharti Mittal – as India.
To Modi’s credit, he listened to the Americans carefully and seemed to take the complaints on board without defensiveness. He knows he has to fill the gap between India’s promise and performance or his so-called magic will evaporate. As a keen US analyst of bilateral relations noted, “He has only himself to blame for setting the expectations so high.”
Modi had made promises last September – red carpet instead of red tape, a simplified tax regime, down with archaic laws, e-windows for paperwork and an eager bureaucracy. Come September, the performance is being judged.
Worrying indicators
The general sense of enthusiasm he generated in the United States a year ago ‒ from government to corporations ‒ has thinned somewhat. Privately, many say Modi’s incremental path is opposite to what was expected from his historic mandate. He lost the honeymoon period worrying about this or that state election.
Publicly too, the Americans are more open about what they perceive as problems in the commercial relationship. US Commerce Secretary Penny Pritzker reminded a packed audience at the Carnegie Endowment hours before the Strategic and Commercial Dialogue that India was 186th out of 189 countries ranked by the World Bank in enforcing contracts.
Prtizker said the bankruptcy regime was “outdated,” contracts were “frequently reinterpreted” and that Indian courts took generally five years to settle a commercial case. Doing business in India was a challenge. It was “absolutely critical” to get the system modernised, she said.
Nirmala Sitharaman, minister of state for commerce and industry, tried to blunt the offensive but statistics, especially those collated by the World Bank, can’t be disputed in this environment. She said India “stands out in the global economy” as a stable performer. On specifics, she said a new layer of commercial courts was being added, that a committee was looking into Indian laws to find that should be removed completely and that 98 steps had already been identified which the states were in the process of implementing.
But American CEOs generally stuck to their narrative. David Cote, chairman and CEO of Honeywell who has 13,000 employees in India and knows the country well, said India was “at the cusp of another reawakening” but “you can understate the difficulty of doing business in India”.
Cote told the same conference: “The bureaucracy is stultifying. It is as if you took the British bureaucracy doubled it and then added ten times more people. It makes getting anything done impossible. The bureaucracy needs to speed up, it needs to focus on helping business and it [needs to be] focused on decisions.” He added that the Modi government was trying to make all that happen.
Sources of friction
Michael Burke, chairman of AECOM, a $19 billion infrastructure firm, said the poor infrastructure was a huge source of “friction” on the Indian economy and given the “fragmented nature of Indian democracy”, it could be hard to complete projects on time. He was implying that court cases related to land acquisition could go on for years.
To turn the narrative around, Modi needs one big American project to start in India soon to showcase his policies. But the problem is that unlike other countries the US government does not have dedicated state funds it can channel towards countries. It doesn’t build railways like China or dams as the Soviets used to.
It will have to be the US private sector that will help Modi realise his development agenda. So far, they are waiting and watching.
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