New Delhi: Indian investments remain attractive compared with global peers, but execution risks and shortage of quality talent at the middle-management level threaten to take the shine off the India story, said participants in a panel discussion at the World Economic Forum’s India Economic Summit.
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“Reality is there’s no substitute for (economic) growth,” said Neeraj Bharadwaj, managing director, Accel India Growth Management Co. Ltd, explaining the context in which Indian investments are viewed.
One of the themes which came up during the panel discussion on the Indian investment outlook was that easy opportunities were a thing of the past. Returns on investments required patience and work on building the right kind of partnerships.
“It is tough to find obvious value,” Sanjay Nayar, chief executive officer, KKR India Advisors, a private equity firm, said.
Among the sectors identified as attractive were cement and steel, which are linked to infrastructure investments, and financial services.
“There is huge opportunity in financial intermediation and financial infrastructure space,” Madhu Kannan, chief executive officer of the Bombay Stock Exchange, said.
Ravi Pandit, chairman and group chief executive officer, KPIT Cummins Infosystems Ltd, identified the auto sector as an attractive investment destination.
As the panel discussion moved to risks confronting Indian investments, the panellists were anxious about the slow pace of getting things done in India, and also the uncertainty surrounding the execution of projects.
Beyond the familiar complaints of red tape slowing the pace of execution, the panellists were concerned by constant interference from the state or its arms in business.
“Getting business done has become more difficult,” Nayar said. “Interference in private sector from the state or arms of the state,” he added, has increased the challenge. “Enforcement mechanisms and time to get justice done is a huge problem,” Kannan said.
One of the reasons for execution delays is that different arms of the government work in silos, and getting clearances for a business which deals with the multitude of government arms is a challenge, Joseph Massey, managing director and chief executive officer, MCX Stock Exchange Ltd, said.
Besides the challenges posed by red tape and a lack of coordination among different arms of the government, the panellists were worried by the shortage of right kind of talent at the middle management level in industry.
“Supply constraint of trained manpower is a problem,” Pandit said. Only 15% of graduates, on average, are employable, he added.
Bharadwaj pointed out a related challenge with the workforce which stemmed from the dominance of family-owned businesses in India.
While the commitment levels of a family running a business is unmatched, their decision-making pattern could be ad hoc. One of the consequences is that promotions need not always be on merit, he said.
The discussion on the comparison between India and China was relatively short and a couple of panellists pointed to macro risks apparent in China’s political and economic system.
Massey pointed out that China’s authoritarian political structure had not been tested recently, and in the absence of evidence that it could handle stresses emerging from a fast transition of society, it continued to be a risk factor.
Bhardwaj felt that future investments would be better off with consumption-led growth model of India as compared to the investment-led growth model of China.