India is the place to invest, Sun Global’s Kapadia says
In recent times, a number of emerging markets fund managers and selectors have expressed their favourable views on investments in India to InvestmentEurope.
Mihir Kapadia (pictured), chief executive officer of London-based wealth manager Sun Global Investments, joins the group, calling India the most exciting place to invest over the coming next years.
“Indian economy is the fastest growing economy worldwide in GDP terms. Lots of investments are made across several sectors such as infrastructure. Some 30 miles of roads are being built every day in the country. Additionally, we stress huge demand on the consumer side as Indian middle class emerges ever more. Sectors like technology and household consumption can benefit from this trend,” Kapadia says to InvestmentEurope.
He adds that the Indian government’s efforts to attract foreign investments in India begin to bear fruit since a number of foreign large companies have started product manufacture there and question marks are being cleared.
Sun Global Investments’ CEO says the Indian government targets for example the sector of defense, given that India stays the world’s largest importer of weapons and ammunition
“Indian authorities try to convince suppliers to set up themselves in the country to create long-term and sustainable employment in the sector of defense,” he argues.
Another component that advocates for foreign investments in India remains recent regulatory changes.
The banknote demonetisation process, implemented in November 2016 with the aim of eradicating black money and corruption in the country among others, has caused some trouble to Indian economy over the short-term.
Kapadia says the shock was mostly due to the lack of cash and the lack of knowledge regarding the use of non-cash payments such as credit cards. An unexpected effect of the reform he stresses is that it pushed India in the era of digital payments.
The Good and Services Tax reform, which will enter into force either next June or July, will also help India to draw foreign investors in Kapadia’s view.
“GST is probably one of the best reforms expected in and out of India. It will harmonise all Indian states’ taxes. The country is comprised of 29 states. Currently, if a product is manufactured in the west of India and is to be sold in the east of India, you would have to cross three or four states to deliver it and at each state, you would be stopped and you would have to pay entry as well as exit taxes.
“With the GST reform, you will not have to pay at every state level. The main issue remains how the government will split the tax revenue as all Indian states’ budgets are more or less relying on taxes over goods and services,” Kapadia develops.
Sun Global Investments’ CEO estimates India’s GDP could increase by a minimum of 1.5% to 2% by implementing the GST reform.
Overall, Kapadia notes the recent elections’ results that have comforted the current Indian government have validated the policies it has set.
Brexit: an opportunity for India
In the light of Brexit negotiations, Kapadia assesses opportunities exist for India to benefit from Brexit at the end of the talks between the UK and the EU.
“When Brexit will effectively happen, the UK and India are poised to have one of the best trading relationships no one can imagine. Both countries are culturally engaged. They have a shared history, a common language, a long standing relationship in politics. British companies have been established in India for a long time and large Indian firms have heavily invested in Britain.
“In a post-Brexit environment, we believe the Commonwealth of Nations provides the best resources for Britain to build a new ecosystem. Perhaps Europe is a lot more mature market than some areas of the Commonwealth but that does not mean British goods would not find the same kind of market within the Commonwealth. Australia, Canada and India being country members of the Commonwealth, we can establish a huge trading block,” Sun Global Investments’ CEO explains.
In addition, Kapadia highlights that India requires much expertise in various sectors (financial services, infrastructure, IT) and estimates the UK has both people and know-how to contribute to India’s development.
Sun Global Investments’ CEO quotes the example of British operator Vodafone which has announced last March the merger of its Indian subsidiary with local telecom company Idea Cellular in order to create the largest telecom group in the country. Kapadia observes India will hence become Vodafone’s largest market in the world.
But he points out hurdles such as immigration barriers could harm the UK-India relationship.
Says Kapadia, Brexit may redefine the relationship of India with the eurozone as Indian companies have been using Britain as their European base.
He acknowledges that in a post-Brexit world, some Indian companies will be “forced to look at alternative destinations if they want to trade in Europe.” However Kapadia says that given the current political environment, Indian companies will take their time to see whether they need to move or not.