Indian Prime Minister Narendra Modi is delivering the opening plenary at Davos. Professor Anil K. Gupta and Haiyan Wang, co-authors of The Quest for Global Dominance and Getting China and India Right, consider some of the main messages he may deliver.
Mr. Modi will be delivering the opening plenary at the World Economic Forum’s 2018 Annual Meeting in Davos this January. Even though Mr. Modi speaks English fluently, we expect that, as is his practice when outside India, he’ll be speaking in Hindi. He is, after all, a committed nationalist.
Why now? The answer lies in the fact that this is India’s moment on the global stage. The last time an Indian Prime Minister went to Davos was in 1997.
Along with China, India remains one of the world’s two fastest-growing economies. In fact, in 2018 and, for years to come, India is likely to remain the world’s fastest-growing large economy. President Xi delivered the opening plenary address at Davos last year. So, it’s appropriate for Prime Minister Modi to deliver the opening plenary this year.
Note also that India crossed France in 2017 to become the world’s 6th largest economy. IMF projects that, in 2018, India will cross the UK to become the 5th largest and, by 2022, to cross Germany to become the 4th largest.
Next year in 2019, Mr. Modi will be busy with the upcoming general elections. He would not want to be distracted with key foreign visits at that time. Thus, 2018 is indeed the ideal year for Mr. Modi to be at Davos.
WE believe that Mr. Modi’s central focus at Davos will be to showcase India to the global audience, in particular to corporate CEOs. His goal will be to keep strengthening Brand India so that the world’s top giants keep bringing large amounts of FDI and technology to India. For the last two years, India has already been the largest recipient of greenfield FDI in the world, ahead of China. Mr. Modi would want to reinforce the factors driving this growth in FDI. More concretely, some of the key messages are likely to be the following.
First, India is now open for business – as demonstrated by the 30 point jump in World Bank’s Ease of Doing Business rankings. India is now among the top 100 countries, for the first time ever. Mr. Modi has repeatedly voiced his goal to take India to the top 50 category.
Second, India is committed to reforms. In mid-2017, the government launched the national Goods and Services Tax (GST), the single biggest reform in decades. The GST subsumes various state-by-state taxes which slowed down inter-state commerce. India is now well on its way to becoming an integrated national market. The big beneficiaries will be companies that can scale up, e-commerce players such as Amazon and Flipkart, and logistics companies – and, of course, consumers. The GST still faces teething troubles in terms of the underlying IT network as well as various tax slabs. However, these are being addressed at a break-neck pace. The expectation is that, by end-March 2018, the new reality should start to get reflected on the ground. This is one of the reasons why IMF expects GDP growth to be 7.4% in 2018 versus 6.7% in 2017.
Third, FDI reforms. Vast sectors of India’s economy are now open to FDI – retail, construction, insurance, airlines, telecom, defense, you name it. In most industries, the government now permits majority control by foreign investors, often via the “automatic” route i.e., the foreign investor does not need prior permission from the government. It only needs to keep the government informed. FDI reforms are clearly the primary reason why India is now the largest recipient of greenfield FDI in the world.
Fourth, digitization. As India’s Finance Minister recently announced, the country is within reach of making good on the government’s “1-billion, 1-billion, 1-billion” vision i.e., 1 billion people with biometric identity numbers linked to 1 billion bank accounts and 1 billion mobile phones. As he noted, the government’s goal is to “end the financial, and hence economic, digital and social exclusion faced by India’s poor.” As the country moves towards a less-cash economy, transaction costs have started coming down. Leading banks have started scraping social data to make loans to people who may otherwise have no means to prove their creditworthiness. And, the government now transfers subsidies to over 300 million people directly into their bank accounts; prior to digitization, an estimated 86% of the subsidies would get siphoned off by middlemen.
Fifth, Mr. Modi is likely to talk about India’s democratic values and commitment to a “rules-based” global order. This will be a direct attempt to differentiate India from China as the latter has tightened up domestic control, become less friendly to multinationals, and become more assertive in the South China Sea and elsewhere. With each passing month, Mr. Modi is positioning India as the preferred partner for the US, Japan, Australia, and the EU.
As he delivers the plenary address, Mr. Modi will be addressing two key audiences – the global elite in Davos but also the citizens of India. It’s hard to see how raising India’s global profile would be seen as anything but a plus by his fellow country-men and women.
Anil K. Gupta is the Michael Dingman Chair in Strategy, Globalization & Entrepreneurship at the Smith School of Business, The University of Maryland. Haiyan Wang is Managing Partner, China India Institute. They are the coauthors of The Quest for Global Dominance and Getting China and India Right and have been jointly ranked as #28 in the Thinkers50 list of “the world’s most influential management thinkers.” Anil is also a member of the World Economic Forum’s Stewardship Board for the Initiative on the Future of Consumption. Haiyan is a Deputy to this Board. They are both attending the Forum’s Annual Davos Summit in January 2018.