Slowing growth, confusion and delays over economic reforms in India are prompting foreign investors to give the country a wide berth at a time when it is in dire need of investment.
Foreign direct investment (FDI) into India plunged 67 per cent in the first financial quarter of the Indian fiscal year between April and June to US$4.4 billion (Dh16.16bn) compared with the same period last year, according to figures from the government.
"Clearly economic growth continues to slow down," says Vaibhav Agrawal, the vice president of research at Angel Broking. "At the same time inflation continues to go up. The whole growth and inflation mix to a large extent can be blamed on policy as well. A lot of policies are not coming through. Infrastructure execution is not high enough. Foreign direct investment is not happening in sectors that need it, like aviation."
The UAE is the 10th largest investor in India in terms of FDI, having ploughed an estimated $2.2bn into the country, according to India's ministry of external affairs. Investors in India from the UAE include the ports operator Dubai's DP World and Emaar, a property developer based in the emirate that built the Burj Khalifa, the world's tallest tower.
Economic growth forecasts for the year have been cut to well below 6 per cent in many cases.
A weak rupee and fears of a sovereign rating downgrade to junk status are other concerns for investors. Meanwhile, political bickering is only helping to delay major economic reforms, observers say.
Analysts note that many investors are waiting for a more stable economic operating environment before injecting funds into India.
From the foreign investment viewpoint, there are a couple of sticky issues regarding regulation, whether it's tax regulations or clarity on FDI, says Vidya Mahambare, the principal economist at Crisil, a ratings and research firm in India.
These include vaguely defined proposals to crack down on tax evasion, which have confused investors, she says. Another major source of concern is that the government seems to be unable to make up its mind over economic reforms, such as its policies on foreign investment into the retail sector. The Indian government last November announced a reform to open up the retail industry to allow 51 per cent FDI in multi-brand retail. But it put these plans on ice soon afterwards because they met opposition from some corners.
"The core of this problem is there are various regional parties that have quite a few seats in the parliament, as a result of which there are many opposing interests at play, so it's very difficult to form a consensus," says Mr Agrawal. "That is the problem the government is grappling with."
In January, the Indian government also decided to remove a cap on foreign investment for retailers that sell only one brand to allow 100 per cent ownership. But it added the caveat that they would have to source 30 per cent of the value of their products locally from small and medium-sized businesses.
This has deterred foreign companies from opting for 100 per cent investment, although many retailers are keen to get a foothold in India, which is regarded as one of the most promising, largely untapped markets in the world. So far, only the Swedish furniture chain Ikea and the British shoe retailer Pavers have announced plans to opt for 100 per cent investment. Even Ikea is understood to be concerned about how it will comply with the 30 per cent rule.
One major flaw is that once giant multinational firms start sourcing from small and medium-sized businesses, these local companies will grow to the point where they no longer fall under the definition of being of small or medium. The consensus is that the government is now in the process of revising this clause, only adding to the general perception of uncertainty.
Rohini Malkani, an economist at Citibank in India, describes lower foreign direct investment, "which is largely a result of an unconducive domestic policy environment", as a "key worry".
India's new finance minister, P Chidambaram, who came into office just a month ago, immediately highlighted that these issues were at the top of his agenda.
"The key to restart the growth engine is to attract more investment, both from domestic investors and foreign investors," he said in a speech days after assuming his role. "Since investment is an act of faith, we must remove any apprehension or distrust in the minds of investors. We will improve communication of our policies to potential investors. The aim will be to remove the perceived difficulties in 'doing business in India', including fears about undue regulatory burden or regulatory overreach."
Investors from the UAE to date have not always had an easy time in India. Etisalat, the UAE's biggest telecommunications company, lost its licence in India this year after the supreme court ordered the cancellation of 122 second-generation, or 2G, mobile licences granted in 2008. Etisalat declined to comment on the situation.
Still, others remain optimistic about India and are ploughing ahead with their plans regardless of the economic concerns there.
Landmark Group, based in Dubai, recently signed a franchise agreement with the coffee and doughnuts chain Krispy Kreme to bring the brand to India.
"Once those [policy issues] are sorted by the government, there is no reason why India will not be attractive again, even with a relatively low growth, because growth elsewhere is also falling," says Ms Mahambare.
business@thenational.ae
MWTC info
Tickets to the MWTC range from Dh100 and can be purchased from www.ticketmaster.ae or by calling 800 86 823 from within the UAE or 971 4 366 2289 from outside the country and all Virgin Megastores. Fans looking to attend all three days of the MWTC can avail of a special 20 percent discount on ticket prices.
The National's picks
4.35pm: Tilal Al Khalediah
5.10pm: Continous
5.45pm: Raging Torrent
6.20pm: West Acre
7pm: Flood Zone
7.40pm: Straight No Chaser
8.15pm: Romantic Warrior
8.50pm: Calandogan
9.30pm: Forever Young
The Bio
Favourite vegetable: “I really like the taste of the beetroot, the potatoes and the eggplant we are producing.”
Holiday destination: “I like Paris very much, it’s a city very close to my heart.”
Book: “Das Kapital, by Karl Marx. I am not a communist, but there are a lot of lessons for the capitalist system, if you let it get out of control, and humanity.”
Musician: “I like very much Fairuz, the Lebanese singer, and the other is Umm Kulthum. Fairuz is for listening to in the morning, Umm Kulthum for the night.”
COMPANY PROFILE
Founders: Sebastian Stefan, Sebastian Morar and Claudia Pacurar
Based: Dubai, UAE
Founded: 2014
Number of employees: 36
Sector: Logistics
Raised: $2.5 million
Investors: DP World, Prime Venture Partners and family offices in Saudi Arabia and the UAE
How to volunteer
The UAE volunteers campaign can be reached at www.volunteers.ae , or by calling 800-VOLAE (80086523), or emailing info@volunteers.ae.
NO OTHER LAND
Director: Basel Adra, Yuval Abraham, Rachel Szor, Hamdan Ballal
Stars: Basel Adra, Yuval Abraham
Rating: 3.5/5
Key facilities
- Olympic-size swimming pool with a split bulkhead for multi-use configurations, including water polo and 50m/25m training lanes
- Premier League-standard football pitch
- 400m Olympic running track
- NBA-spec basketball court with auditorium
- 600-seat auditorium
- Spaces for historical and cultural exploration
- An elevated football field that doubles as a helipad
- Specialist robotics and science laboratories
- AR and VR-enabled learning centres
- Disruption Lab and Research Centre for developing entrepreneurial skills
HAJJAN
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If you go
The flights
Emirates flies from Dubai to Seattle from Dh5,555 return, including taxes. Portland is a 260 km drive from Seattle and Emirates offers codeshare flights to Portland with its partner Alaska Airlines.
The car
Hertz (www.hertz.ae) offers compact car rental from about $300 per week, including taxes. Emirates Skywards members can earn points on their car hire through Hertz.
Parks and accommodation
For information on Crater Lake National Park, visit www.nps.gov/crla/index.htm . Because of the altitude, large parts of the park are closed in winter due to snow. While the park’s summer season is May 22-October 31, typically, the full loop of the Rim Drive is only possible from late July until the end of October. Entry costs $25 per car for a day. For accommodation, see www.travelcraterlake.com. For information on Umpqua Hot Springs, see www.fs.usda.gov and https://soakoregon.com/umpqua-hot-springs/. For Bend, see https://www.visitbend.com/.
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
Brief scoreline:
Crystal Palace 2
Milivojevic 76' (pen), Van Aanholt 88'
Huddersfield Town 0
THE BIO
Born: Mukalla, Yemen, 1979
Education: UAE University, Al Ain
Family: Married with two daughters: Asayel, 7, and Sara, 6
Favourite piece of music: Horse Dance by Naseer Shamma
Favourite book: Science and geology
Favourite place to travel to: Washington DC
Best advice you’ve ever been given: If you have a dream, you have to believe it, then you will see it.
8 traditional Jamaican dishes to try at Kingston 21
- Trench Town Rock: Jamaican-style curry goat served in a pastry basket with a carrot and potato garnish
- Rock Steady Jerk Chicken: chicken marinated for 24 hours and slow-cooked on the grill
- Mento Oxtail: flavoured oxtail stewed for five hours with herbs
- Ackee and salt fish: the national dish of Jamaica makes for a hearty breakfast
- Jamaican porridge: another breakfast favourite, can be made with peanut, cornmeal, banana and plantain
- Jamaican beef patty: a pastry with ground beef filling
- Hellshire Pon di Beach: Fresh fish with pickles
- Out of Many: traditional sweet potato pudding
TO ALL THE BOYS: ALWAYS AND FOREVER
Directed by: Michael Fimognari
Starring: Lana Condor and Noah Centineo
Two stars
The specs
AT4 Ultimate, as tested
Engine: 6.2-litre V8
Power: 420hp
Torque: 623Nm
Transmission: 10-speed automatic
Price: From Dh330,800 (Elevation: Dh236,400; AT4: Dh286,800; Denali: Dh345,800)
On sale: Now
In numbers: PKK’s money network in Europe
Germany: PKK collectors typically bring in $18 million in cash a year – amount has trebled since 2010
Revolutionary tax: Investigators say about $2 million a year raised from ‘tax collection’ around Marseille
Extortion: Gunman convicted in 2023 of demanding $10,000 from Kurdish businessman in Stockholm
Drug trade: PKK income claimed by Turkish anti-drugs force in 2024 to be as high as $500 million a year
Denmark: PKK one of two terrorist groups along with Iranian separatists ASMLA to raise “two-digit million amounts”
Contributions: Hundreds of euros expected from typical Kurdish families and thousands from business owners
TV channel: Kurdish Roj TV accounts frozen and went bankrupt after Denmark fined it more than $1 million over PKK links in 2013
SPEC%20SHEET%3A%20APPLE%20M3%20MACBOOK%20AIR%20(13%22)
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Real estate tokenisation project
Dubai launched the pilot phase of its real estate tokenisation project last month.
The initiative focuses on converting real estate assets into digital tokens recorded on blockchain technology and helps in streamlining the process of buying, selling and investing, the Dubai Land Department said.
Dubai’s real estate tokenisation market is projected to reach Dh60 billion ($16.33 billion) by 2033, representing 7 per cent of the emirate’s total property transactions, according to the DLD.
SERIE A FIXTURES
Saturday
AC Milan v Sampdoria (2.30pm kick-off UAE)
Atalanta v Udinese (5pm)
Benevento v Parma (5pm)
Cagliari v Hellas Verona (5pm)
Genoa v Fiorentina (5pm)
Lazio v Spezia (5pm)
Napoli v Crotone (5pm)
Sassuolo v Roma (5pm)
Torino v Juventus (8pm)
Bologna v Inter Milan (10.45pm)
Small Victories: The True Story of Faith No More by Adrian Harte
Jawbone Press
The specs
Engine: 1.5-litre turbo
Power: 181hp
Torque: 230Nm
Transmission: 6-speed automatic
Starting price: Dh79,000
On sale: Now
BUNDESLIGA FIXTURES
Friday (all kick-offs UAE time)
Hertha Berlin v Union Berlin (10.30pm)
Saturday
Freiburg v Werder Bremen (5.30pm)
Paderborn v Hoffenheim (5.30pm)
Wolfsburg v Borussia Dortmund (5.30pm)
Borussia Monchengladbach v Bayer Leverkusen (5.30pm)
Bayern Munich v Eintracht Frankfurt (5.30pm)
Sunday
Schalke v Augsburg (3.30pm)
Mainz v RB Leipzig (5.30pm)
Cologne v Fortuna Dusseldorf (8pm)
