Since coming to power in 2014, Indian Prime Minister Narendra Modi has been working towards attracting foreign investment into the country, as well as slashing considerable amounts of regulatory red tape.
These efforts have seen a number of high profile successes recently, including $3bn investment from tech giant Amazon. The news represents an endorsement of Prime Minister Modi’s pro-business policies from international investors.
India has long been seen as a market of huge potential for international investors, but because of its labyrinthine regulations and bureaucracy, it has never fully realised its potential.
Amazon to invest $3bn
Amazon’s plans to invest $3bn into its business in India were announced by CEO Jeff Bezos at the US-India Business Council’s Leadership Summit in Washington DC, writes Spencer Soper and Saritha Rai in an article for
Bloomberg. The further investment will increase the firm’s total bet on India’s economy since 2014 to $5bn.
$5bn
How much Amazon has invested in India since 2014
Soper and Rai say that “Amazon has targeted India for international growth after pulling back from China due to fierce competition from that country’s e-commerce giant Alibaba Group Holding”.
The article quotes Colin Sebastian, analyst at Robert W. Baird & Co: “The added investment reflects the success to date of Amazon in India, as well as a bright outlook for the e-commerce market in the region.”
Bloomberg article
Apple stumbles
However, there are challenges that “are likely to hinder that growth story,” writes Dimitra DeFotis in a blog for
Barron’s. Apple, for example, “is seeking a waiver from local manufacturing rules to open retail stores in India”.
The article cites a report by analysts at Mizuho Securities USA, which says that “regulatory politics in India, competition, low wages and lack of carrier support” present obstacles.
The report says that Apple’s entry into the Indian market will not significantly alter its revenue streams in the next few years. “Even if it gets full access to the Indian market, the region will likely contribute $9bn to $10bn in revenue, 4–5% of total sales, which might not be enough to move the needle.”
Barron's article
Backing India investments
Despite Apple’s woes in India, some analysts believe it still represents a good investment opportunity.
The Motley Fool’s Prabhat Sakya believes that the Indian stock market – the National Stock Exchange of India – is amongst the cheapest in the world, alongside China.
Sakya says: “I am a firm believer in the investment credentials of China and India, and have substantial holdings in this region. I think that, after a long and difficult bear market that has lasted 17 years, we are on the verge of an astonishing global equity bull market. And that boom should be centred on China and India.”
He adds that with share prices in these markets as cheap as they have been for nearly a decade, “there has never been a better time to invest”.
The Motley Fool article
Look out for more insight into India's current economic prospects in the July issue of the Securities & Investment Review.