"Bureaucracy
is the stumbling block"
It's probably one of the oldest NRI business
families, and one which is credited with having contributed significantly
to Uganda's economic development. Yet, the Kampala-based Madhvani Group
has steered cleared of India, touted as one of Asia's most attractive
markets. Recently, BT's Alam Srinivas interviewed the group's CEO, Mayur
Madhvani, to find out why.
Q. What's holding back NRI investment in India?
There is much that needs to be ironed out before one would see substantial
medium and small scale investment on an extensive scale by NRIs in India.
The main stumbling block is the bureaucracy, though there has been substantial
improvement in this area. India needs to introduce a well publicised 'fast
track' investment system that other developing countries have adopted,
whereby approval formalities are guaranteed by a specific department,
giving serious investors a 'one stop' facility.
Q. Is the rupee's
vulnerability to the dollar a deterrent?
NRIs do have some concern, perhaps falsely, that the rupee may be devalued
substantially against their offshore funds portfolio. Perhaps a scheme
can be devised whereby offshore freely convertible funds that are invested
in India by NRIs towards equity capital are deposited in India and collateralised
to obtain a Rupee equivalent funding at low interest rates to subscribe
for equity subscription. This would positively stimulate external investments
from the private sector and give the much needed impetus to offshore investment,
which would in the latter scheme protect the foreign investors from fear
of rupee devaluation.
Q. Is your group
willing to invest in India?
Our group is extremely keen on investing in India and would be interested
in a transnational partner who has the resources for an acceptable project,
but would feel more comfortable with an overseas group of Indian origin
that understands the local culture and method of business. We have been
examining several projects and are currently involved in discussions with
various transnational and local parties.
Q. NRIs claim to
be emotionally attached to India, but are reluctant to invest to help
the country. Isn't that ironic?
It is correct
to say that most NRIs have deep emotional links with India. This is demonstrated
by their frequent visits to India and their love of the Indian culture.
A flotation of some of the large corporations on the international stock
exchanges would see substantial funds from NRIs being invested in Indian
ventures through these channels, as they will have an easy entry and exit
mechanism in a freely convertible currency.
Q. Is sourcing
from India an attractive option vis-à-vis China?
The industrialisation of China has gone through a phase where not only
has there been growth, but also a positive effort to address all quality
related controls on products for export. Unfortunately, India still lacks
this improved image despite the fact that substantial exports take place
from India and Indian goods have found their way into many households
in the US and Europe. The situation that confronted Hong Kong and its
relationship with China is unique and it would be incorrect to compare
this relationship with that of India.
Q. What does the
government need to do get the Indian diaspora to invest in the country?
Not only does the government need to capitalise on the NRIs sentiment
of investing within their home country, but it also needs to ensure that
NRIs feel totally comfortable with their investments vis-a-vis a safety
net, future value and easy exit route. India has still not been able to
free the exchange control barriers in relation to current accounts as
well as the capital accounts. In the long run, this would be immensely
useful and would place it at par with other countries like Africa, where
exchange controls have been lifted.
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