A seminar titled "India: Is the growth story intact?" was held at the Greenwood Theatre in London on 19 June 2012. The panel of speakers consisted of: Lord Desai, Jitesh Gadhia, Senior Managing Director - Blackstone, Mark Lewis , Co-Chair India Group - BLP, Ian McEvatt , Chairman - Himalayan Fund NV and Steven O'Hanlon, Chief Investment Officer - Fixed Income, ACPI.
- The India economic growth story is impaired - not intact anymore, but not dead either. Politics and policy paralysis are the main causes. India is known for taking three steps forward and two steps back. You should not write off India in the middle of the two steps back. India is still the second fastest growing major economy in the world.
- The drivers to achieving India's economic potential include: a mature democracy, an established institutional framework, demographics, entrepreneurial spirit, a growing educated middle class and a judicial system which, although it is very slow,has also passed judgements in favour of foreign investors.
- The risks to achieving India's economic potential include: politics, corruption, lack of consensus among coalition partners for reforms, poor infrastructure, inadequate education and skilling, lack of a developed bond market to help finance infrastructure growth. The recent proposals on retrospective tax and the "Vodafone case" have damaged foreign investor sentiment and limited their appetite for what was once a very attractive investment destination.
- The outlook for markets in next twelve months: positive for equity and bond markets. Private equity investments into India are viewed on more than a twelve month horizon and the appetite remains for selective investments.
- The stock market is far more open to foreign investors than Foreign Direct Investments which are subject to sector caps. Politics severely limits the opening up of key sectors. Bureaucracy and red tape need to be reduced substantially to make India a more attractive destination.
- Politics, scandals and poor governance were mentioned throughout the seminar by the panellists. There was a need to de-link politics from economic decisions. In reality this is impossible, and limits India's economic potential.
- Overall, the impairment in India's economic growth was seen as being short-term. But, many "speed bumps" lie on the journey ahead to returning to 9%+ growth. Politics, corruption, excessive bureaucracy, poor infrastructure and inadequate education and skilling are among challenges that limit India from realising its economic potential. The size of the market is compelling, especially at a time of weakness in developed markets.