In a little under a fortnight, Prime Minister Narendra Modi will be in Davos to address a global audience at the upcoming World Economic Forum — a year after his Chinese counterpart took centrestage there.
Over the past few weeks, much of the focus of the economic commentary here has been on the Central Statistics Office cutting the forecast for growth in FY 2017-18 — from 7.1% at the start of the fiscal to 6.5%, extra borrowings of Rs 50,000 crore announced by the government, and lower than expected collections from GST. This has fuelled doubts among investors about economic prospects in the year ahead, especially with Lok Sabha polls just a year and half away.
The new norms on Foreign Direct Investment (FDI), approved by the Cabinet Wednesday including automatic approval for single-brand retail and also opening the door for foreign airlines to invest up to 49 per cent in Air India, comes weeks before the next Budget, the last full-fledged one of this government before its term ends in May 2019. But Wednesday’s announcement may well be a wider signal by the Modi government for an audience of global CEOs and leaders in Davos — US President Donald Trump figures in the latest list — that it will stay the course on wooing overseas investors.
That narrative is important considering not just that private investment in India has been weak, but from the fact that overseas investors have been far more bullish on India over the past few years despite growth concerns. In FY 2016-17, FDI was at a record $60.1 billion while foreign funds have been buying into stocks and more into India debt, betting that India would sustain growth over the next few years.
The timing this time could also be opportune. For, on Wednesday, the World Bank unveiled its report on Global Economic Prospects to say that India could be in pole position in 2018 with growth projected at 7.3%, ahead of China which is projected to slow down from 6.8% in 2017 to 6.4% this year. The government and several economists too reckon that there will be an uptick in 2018-19 as the disruptive effects of both demonetisation and GST wear off and exports pick up on the back of a global recovery in trade.
The latest FDI rule changes also come in the backdrop of a planned push to market India as a preferred investment destination at the upcoming WEF which will be attended by CEOs of several global blue chip firms. It should help the government that India will have a major representation of top CEOs this time and at least three Cabinet ministers to buttress their case.
The focus could well be on India therefore, according to some of the Davos regulars who say that the presence of the Prime Minister himself can help sustain the investment focus on India. After H D Deve Gowda in 1997, no Indian Prime Minister has visited Davos.