The 'Make in India' initiative provides significant opportunities to Nordic Companies
Prime Minister Modi's campaign "Make in India" has received attention around the world. In all its simplicity, the plan is to increase industrial production from 15 percent of GDP today to 25 percent. Investors who have bought shares in anticipation of major reforms, hope that the plan is realistic.
While the new Indian government is getting its act together in managing an extensive and complex democratic country like India, investors expectations have been high as the stock market began its journey north and attained new highs.
Just a few months ago, the Indian economy was paralyzed as the old government could not implement changes. Generally such a situation often can provide an opportunity for rapid operational changes with a positive effect in the short term if reforms were only aimed at the "low-hanging fruit" - those that are easy to pick. Prime Minister Modi who is a staunch exponent of new reforms that India needs have not just yielded to the low-hanging fruits that produce rapid economic growth.
Therefore, both consumption and investment has got the psychological kick-start to get started and has set the ball of growth and progress rolling.
Hopefully, there are more reforms in the pipeline as there is limited financial room for maneuver that places the need for reforms even further under pressure. Here are some pointers to address;
- The future reforms must address the sea of subsidies that are in all directions, primarily for the benefit of the poor population.
- Creating more jobs is the key. India is in the demographic situation that there is a net addition to the labor market.
- The production of goods for domestic consumption has resulted in importing a surprising amount of consumer goods to the households.
- India has cheaper labor with indirect references to the rising labor costs in China. The production will not be moved to India, unless the difference is significant. An added challenge is the global overcapacity in industrial production.
- The hopeless infrastructure in India means that the products physically cannot be transported efficiently enough. The price of land transport for a container to port is twice as expensive as in China. Prime Minister Modi had developed much of the infrastructure in the state of Gujarat.
- The biggest challenge is financing of the gigantic amount needed to develop infrastructure. The current figure is 1,000 billion dollars, which is over 50 percent of India's total GDP.
- Private investors and large funds are the only real source of funding. The new government is much more confident about working with businesses and the private sector in general.