Slowing economy has not dimmed India’s appeal in Davos

This report is from this week’s CNBC ‘Inside India’ newsletter, delivering timely and insightful market news and commentary on the emerging powerhouse and the big companies behind its meteoric rise. Do you like what you see? You can subscribe here.

Seven years ago in Davos, Indian Prime Minister Narendra Modi spoke of India’s ambitions to become a $5 trillion economy by 2025.

“The people and youth of India are now willing to contribute to the creation of an economy of $5 trillion by 2025,” he outlined in his speech at the 2018 World Economic Forum (WEF).

“Not only this, when innovation and entrepreneurship… help (individuals) transform from job seekers to job creators, then the number of avenues that will open up for your country and your business can only be imagined.” Modi added.

It is fair to say that achieving that goal has proven difficult.

The Indian economy is expected to be around 4.27 trillion dollars according to the International Monetary Fund this year, $0.73 trillion short of Modi’s target.

Is economy in slowdown has raised questions about the country’s lofty growth targets. Market watchers maintain that India is now in the midst of a cyclical slowdown.

However, what is interesting is that India’s story – and its growth potential – continues to attract the attention of investors in India, Davos and beyond.

India is among the five main territories where global CEOs surveyed by consultancy PwC are looking to invest over the next 12 months. The other territories that ranked in the top five among the 4,700 CEOs surveyed in 109 countries were the United States, the United Kingdom, Germany and mainland China.

Optimism about India has spilled over into the ongoing discussions in Davos.

Speaking to CNBC on the sidelines of this year’s World Economic Forum, Khaldoon Al Mubarak, Managing Director and Group CEO of Mubadala Investment Company described India as “a very, very interesting country (and) a very interesting market.”

Among the metrics that stand out to him about India’s potential is its large, yet young, demographic. About 480 million Indians are under 18, more than the population of the United States, the combined population of Europe, the number of people in the Middle East and South America under 18, Mubarak said.

“We have been investing in India… for years, and we continue to work to build our portfolio in India and really ride that wave that has already started,” he said.

This cycle, he added, “will continue, in my opinion, into the future.”

Mubadala’s investments in India include Tata Power Renewable Energy, owned by the Tata Group, and Trusted Industries-The technology giant backed by Jio Platforms.

Prosus is another investment firm looking to capitalize on India’s growth potential, especially the country’s technology industry.

“They saw the impact of technology in India… and they say ‘we are ready for the next step,'” the company’s CEO said. Fabricio Bloisi told CNBC on the sidelines of the summit.

“Prosus is willing to invest much, much more in India. We have invested about $8 billion there in recent years and we are going to invest much more,” he added.

The Indian startups that Prosus has invested in include food delivery company Swiggy, edtech company BYJU’s, agritech player Dehaat and e-commerce platform Meesho.

Advancing in technology

The interest in India – particularly opportunities in its tech and startup space – is in line with the government’s broader focus on developing the sector.

Among the top priorities of the Indian delegation in Davos this year was deepening its presence in the semiconductor industry through government incentives and targets.

This includes exploring the development of its own Graphics Processing Unit (GPU) in the next three to five years, Ashwini Vaishnaw, Minister of Railways, Information Technology and Information and Broadcasting. he told CNBC-TV18 on the sidelines of the WEF meeting.

Other projects he revealed include India’s plans to develop 25 indigenous chipsets that are Designed and manufactured in the country.. It hopes to launch the first chip in September and the first factory in 2026.

Vaishnaw also outlined the government’s goal of providing underlying computing power with 1,000 GPUs, especially for the benefit of startups that lack access.

This is part of the government’s focus this year on nurturing talent and leveraging data to create robust data sets for training AI models, he added.

Vaishnaw led India’s largest delegation to Davos this year, with representatives from eight states – Andhra Pradesh, Telangana, Karnataka, Kerala, Tamil Nadu, Maharashtra, West Bengal and Uttar Pradesh – each of which competing for investments for your next initiatives.

For example, Andhra Pradesh Chief Minister Chandrababu Naidu supposedly showed the state’s business-friendly policies hoping to court multinationals like Unilever, PepsiCoGoogle Cloud and AstraZeneca.

Meanwhile, its neighbor Telangana showcased its expertise in electric vehicles, pharmaceuticals and semiconductors. Elsewhere, Maharashtra reportedly presented itself as India’s industrial power.

The strong presence of Indian officials in Davos is probably a recognition of the fact that companies, particularly those that have only been around for a few years, need more capital than they can raise domestically.

Foreign investment in the country is “drying up” due to economic policy uncertainty and geopolitical risks, according to Dhiraj Nim, currency strategist and economist at ANZ Bank.

One way forward is for the Indian government to “encourage greater trust by reducing political and regulatory costs, improving the ease of doing business in India,” he suggested.

“There is a lot India can do even if global variables are out of control. India plans to become a developed nation by 2047, so we would need much stronger growth than the 6-7% we are used to. And growth will have “This can be achieved by making more investments and also by strengthening workforce productivity and technological capabilities,” Nim added.

The question of how India plans to continue growing at a sustainable rate, while creating jobs and increasing productivity, is a priority for the Indian government. In Davos, India’s Minister of Railways, Electronics and Information Broadcasting, Ashwini Vaishnaw, sat down for discussions with a group of Indian executives, investors and businesspeople from around the world. The breakfast organized by Brunswick Group and CNBC on the sidelines of the World Economic Forum allowed executives and investors to ask questions of the Minister and discuss the investment environment in India.

India could reduce its disinvestment target for FY25. The country’s government is seeking cut its divestment and asset monetization targets by 40%, or to less than 300 billion rupees ($3.47 billion) from 500 billion rupees, by the financial year 2024 to 2025, The Economic Times reported, citing people familiar with the discussion. Regulatory hurdles and valuation difficulties have proven to be obstacles, but Prime Minister Narendra Modi’s administration has still sold more shares in state-owned companies than previous governments.

The Quad met and reaffirmed their partnership. Foreign ministers from the group, made up of the United States, Australia, India and Japan, met on Tuesday and stressed the importance of preserving a free Indo-Pacific, according to a joint statement issued after the talks in Washington. The meeting, hosted by US Secretary of State Marco Rubio on his first day in office, was intended to indicate that Countering China was a top priority for the Trump administration.the analysts said.

Oil prices could rise in India. The United States imposed new sanctions on Russian oil on January 10. As India imports about 40% of its oil from Russia, according to trade intelligence firm Kpler, New Delhi could face a sudden supply crisis. Supply disruptions to India could be up to 500,000 barrels per dayRystad Energy senior analyst Viktor Kurilov told CNBC. To mitigate the potential oil shock, Indian importers are looking to import oil from suppliers in the Middle East.

Indian stocks traded mixed this week. He ingenious 50 The index fell 0.03% this week and closed at 23,205.35 points.

The 10-year Indian government bond yield remained stable at 6.78%.

On CNBC TV this week, Kumar Rakesh, an analyst at BNP Paribas in India, said optimism about India’s auto industry. Indian exports of passenger vehicles and motorcycles have been growing at a reasonably strong pace in recent years, especially in markets in Africa, Latin America, the Middle East and Southeast Asia, Rakesh said. Additionally, Indian automakers have been able to enjoy higher profitability because their domestic production cost is one of the lowest in the world.

Meanwhile, José Rasco, CIO of HSBC Global Private Banking and Wealth Management Americas, acknowledged that the Indian market is not cheap, but that is because investors “paying for quality.” Some characteristics that attract investors to India are its young and diversified economy, a good legal system and increasing productivity in recent years.