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The elephant awakens

Article Abstract:

India is reaping the rewards of a five-year-old economic liberalization program that has opened up many of its industries to private-sector investment by local and foreign business groups. As a result, the Indian economy, which as early as 1991 was still heavily protected and largely government-controlled, has undergone a radical metamorphosis and is now growing at a robust 5% clip, up from a shaky 1% in 1991. The shift to a market economy began that year when the government began its economic liberalization campaign as a means of countering a balance of payments crisis. Since then, the hidden potential of the Indian economy has been liberated with the removal of import controls, the reduction of tariffs and the overhaul of the Indian financial markets. As a result, India is now experiencing a surprisingly strong boom in foreign investment and trade.

Economic policy

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The impatient need not apply

Article Abstract:

Foreign investors cannot afford to ignore India given the country's sheer size. With its 900 million people and a growing middle class, its potential as a consumer market is enormous. Another attraction is the strong performance of the Indian economy in recent years. It has been growing at an average of 7% annually since 1994, a rate which if sustained could bolster GNP to over $2 trillion by the year 2005 and to $4 trillion by 2015. India could end up among the world's five biggest economies. However, investors should also keep in mind that realizing the country's massive potential will not be without difficulties. India is still a highly complex and problematic market despite the government's reform measures. Among the problems that investors can expect are poor infrastructure, too much red tape and highly competitive domestic companies.

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A stake in the road to modernisation

Article Abstract:

India is an attractive destination for long-term foreign investment. The funding requirements for the country's infrastructure projects are expected to increase from 5.5% of GDP in 1997 to around 7% in FY 2000-01 to 8% in 2005. This means that India will need approximately $15 billion until 2001 and another $50 billion in the five years thereafter. However, foreign investors should be prepared for long-term participation in the Indian market since they cannot easily withdraw once they enter it and encounter difficulties. Investors should also anticipate a number of problems, including political instability, excessive bureaucracy and the slow pace of economic reforms. One way for foreign companies to reduce the risks of doing business in India is to find a local partner with the proper credentials.

Infrastructure (Economics)

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