(MENAFN- Gulf Times) If global leaders and CEOs who converged on Indian Prime Minister Narendra Modi's home state of Gujarat on Sunday for the three-day "Davos of the East" meet have driven home one clear message, it's this: India must tackle its crumbling infrastructure, infamous red tape and lay out clear policies to attract the billions of dollars it badly needs to lift growth above 8%.
US Secretary of State John Kerry led a roll call of leaders, including UN Secretary General Ban Ki-moon and World Bank head Jim Yong Kim. US President Barack Obama visits India later this month.
"There is an air of optimism in the air of India," said Sam Walsh, CEO of mining giant Rio Tinto, who touted two potential projects: a $2bn iron ore project in Odisha state and an investment in Madhya Pradesh that could employ 30,000 diamond cutters.
Yet, eight months into Modi's rule, the failure of Asia's third-biggest economy to emerge from its longest slowdown in a generation is raising doubts about whether Modi's promise of "red carpet, not red tape" is more substance than style. "A majority of the CEOs ... want to do business in India but are hesitant to enter the Indian markets till the government tackles the problem of crumbling infrastructure," one Canadian CEO said.
India needs growth in the range of 8% to 10% to create enough jobs for the 200mn Indians (of the total of 1.2bn), who will be reaching working age over the next two decades. By the government's own reckoning, the county needs $800bn a year in investments to accelerate economic growth to 7% from the current closer to 5%. That is expected to lift growth this year to 6.4%, said the World Bank's Kim, who called India a "bright spot" in an otherwise gloomy global economic sphere. But the target would still be short of the above 8% India needs to create jobs for the 1mn who join the workforce every month.
To be sure, Modi's successful, but slow-starting, record as the chief minister of Gujarat, has fuelled hopes among investors. He has already opened up various sectors for foreign investment but shown little appetite for structural reforms.
Apart from the economic realm, Modi has to rein in such distractionary elements as the Rashtriya Swayamsevak Sangh, the powerful, Hindu nationalist outfit, which has an intensive conversion programme to recover its "lost property". The prime minister also has to see that some populist ministers, who are playing to the voters' gallery with naive comments to glorify India's Hindutva lineage, stick to their portfolios, if he has to keep the focus firmly on quality reforms and economic growth.
In a wider sense, India's nearly $2tn, 60% consumer driven economy (one of the world's 10 largest; and third largest on purchasing power parity) offers tantalising prospects for investors. But Modi and his team are facing a Catch-22 challenge to achieve both fiscal discipline and a return to the era of 8% growth. The government has to start pouring money into vital infrastructure without blowing a hole in the budget, which will force the central bank to keep interest rates high, dampening growth.
If time is money, Modi, who won India's strongest election mandate in 30 years last May, is running out of the former to deliver on his reform pledge so that he can lure in the latter.
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