Davos: India flexes its muscle as China’s star fades

Davos, Switzerland

Covered in fresh snow, the promenade of the World Economic Forum is littered with billboards and pavilions of businesses and governments seeking attention and deals. We have tech giants, major consulting groups and representatives from the Middle East.

But this year, it’s Davos’ main street that’s dominated by Emissaries from India hijacked at least eight storefronts, appealing to the political and business class of elite gatherings.

“Every ten steps there is either us, a state government or a private company,” said Deepak Bagla, CEO of national investment promotion agency Invest India. Bagra, one of his investors, joked that he used to call the boulevard “Little India.”

India Powerful for good reason. In 2023, the country is expected to be the best performer among major economies as fears of a global recession persist. The World Bank estimates 6.6% growth compared to just 0.5% for the US and 4.3% for China.

If we can keep the momentum going, According to analysis by the Center for Economics and Business Research, India will overtake Germany to become the world’s fourth largest economy in 2026, overtake Japan from third place in 2032, and reach a GDP of $10 trillion by 2035. It will be a worthy third country.

Today, India’s economy is around $3.5 trillion, making it the fifth largest economy in the world.

Geopolitics are driving investment. When Western business leaders talk about “nearshoring” (shortening supply chains to reduce risk) or “friendshoring”, i.e. promoting economic cooperation with countries with similar values. , the world’s largest democracy presents a clear alternative to China.

India is also set to replace its powerful neighbor as the world’s most populous country this year.

Gita Gopinath, deputy managing director of the International Monetary Fund (IMF), told India’s business news channel, “Many companies, many companies are trying to diversify India away from other countries, including China. We see it as an investment,” he said. His CNBC-TV18 in Davos. “It’s just the world stage.”

India is not completely detached from worries about the global economy, as high interest rates and inflation and continued uncertainty over Russia’s war in Ukraine have pushed the world to the brink of recession.

“The Indian economy is very resilient to a deteriorating external environment,” World Bank country director Auguste Tano Kuame said in December, referring to the buffer provided by a large domestic market. “However, unfavorable global developments continue to warrant continued vigilance.”

The 11% depreciation of the Indian rupee against the dollar last year has made imports more expensive and put pressure on the government’s finances. Foreign investment has also been hit. From April 2022 to September, he said, the government’s measure of foreign direct investment inflows fell by 14% compared to the same period in 2021.

However, India’s energy minister, RK Singh, told CNN that there has been significant interest from investors this week, boosting optimism about the outlook.

“We didn’t have to ask for investment,” says Singh. ‘Investments are pouring in’

That confidence was demonstrated at Davos. Maharashtra, Telangana and Tamil His Nadu have rented prominent properties within ski resorts. Tata Group and IT giant Infosys (INFY).While the event’s main India Lounge has provided a popular lunch for fund managers and bankers, two separate pavilions Promote the country’s green energy efforts and stories of small artisans.

The prime minister of Maharashtra, India’s richest state, home to 120 million inhabitants, said preliminary contracts worth 1.37 trillion rupees ($16.8 billion) had been signed earlier in the week. One of his high-profile deals was between automotive systems maker Belrise Industries and Taiwan’s Gogoro, sometimes referred to as the “Tesla of two-wheeled vehicles,” for battery swap infrastructure for his 25 It was a memorandum to invest a billion dollars. Gogoro CEO Horace Luke told CNN that India is a “key growth market” for the company.

Outreach to Indian investors often refers to what economists call the ‘demographic bonus’. The country’s working-age population is over 900 million, and in the next decade he could exceed 1 billion. Many of these workers are entrepreneurial, English-speaking and digitally savvy, said Ila Patnaik, chief economist at Indian conglomerate Aditya Birla Group. They are quite an asset if the Indian economy can create enough jobs.

Plans to achieve net zero emissions by 2070 and renewables to make up 50% of India’s energy mix by 2030 have also unleashed a wave of green investment, said Singh. China. At Davos, Singh is pushing government efforts to dramatically increase production of green hydrogen.

But the biggest draw may come from the emergence of a ‘China plus 1’ business strategy aimed at reducing dependence on the world’s second largest economy. Beijing’s tough pandemic response has strained global supply chains and fueled concerns about China’s openness. Meanwhile, Russia’s invasion of Ukraine has raised alarm over the West’s over-reliance on its geopolitical rivals and sparked scrutiny of China’s threat to Taiwan.

“I think the world is starting to realize that you want to be friends with democracy,” Patnaik said.

The turnaround has already begun. The Biden administration has suggested it wants to deepen trade ties with India. Apple (AAPL), America’s largest publicly traded company, has begun to move its production base to the United States.

“The fact that risk must be spread out to minimize risk is a real pain point for everyone,” says Bagla.

It is no surprise that this new way of thinking will primarily or exclusively benefit India. With rising investment in electronics manufacturing and very low wages, Vietnam offers another option. India’s infrastructure for importing parts and exporting finished goods is also far less developed than in China, creating new costs and risks for manufacturers.

However, Indian business leaders and government officials are not missing a pitch.

“The world needs resilience,” Tata Sands Chairman Natarajan Chandrasekaran said at the Davos conference. “Resilience must take precedence over efficiency.”

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