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India goes big and also courts investors at the World Economic Forum

by SuperiorInvest

India’s position in the global value chain is changing due to government incentives and a digitally savvy economy

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DAVOS, Switzerland — Along the Davos waterfront, World Economic Forum attendees stumble upon the WeLead Lounge, a repurposed showcase showcasing India’s female leadership and talent. There is also the India Engagement Center, a space that promotes India’s growth story, digital infrastructure and its burgeoning startup ecosystem.

Elsewhere at the forum, Indian technology and consulting giants Wipro, Infosys, Tata and HCLTech are in full force to showcase the country’s prowess in key technologies such as artificial intelligence, the topic on everyone’s lips.

The heavy Davos promotions come after India overtook China last year as the world’s largest country by population. Now India is boasting its growing strength as an innovation nation and global business hub to some of the richest and most powerful people in the world.

“India’s presence is certainly considerable: it has some of the most sought-after spots on the main promenade for tech companies,” Ravi Agrawal, editor-in-chief of Foreign Policy and former CNN India bureau chief, told CNBC in Davos. “As China’s economy slows, India’s relatively rapid growth stands out as a clear opportunity for investors in Davos looking for bright spots.”

China’s gross domestic product rose 5.2% last year, up from 3% in 2022, but down from 8.1% a year earlier. India grew 7.2% in the last fiscal year, up from just over 9% the previous year.

India is increasingly looking to promote itself as a more dominant figure on the world stage when it comes to technology and business. States like Maharashtra, Tamil Nadu, Telangana and Karnataka have their own presence in Davos, positioning themselves as technology hubs for manufacturing and artificial intelligence.

“In that sense, separate state pavilions send a message: India’s various regions are competing with each other to offer global companies the best access,” said Agrawal, who has attended Davos for more than a decade and is the author of “India Connected”, which narrates how the smartphone led to a more connected and democratic India.

India still faces many challenges.

According to data from the World Bank, most years in India there are more people who emigrate out of the country than into it. In 2021, net migration exceeded 300,000. Meanwhile, the rupee has weakened sharply against the dollar, pressured by high US interest rates and volatile oil prices.

One of the main risks of doing business in India, according to the International Trade Administration, is “price sensitivity” among consumers and businesses.

“The challenge, as always, is whether India can truly facilitate business there and whether India’s domestic consumers can spend enough to make continuing global investment worthwhile,” Agrawal said.

Seeking foreign investment

Still, foreign direct investment has risen in recent years, rising from $36 billion in 2014, when Prime Minister Narendra Modi was first elected to office, to $70.9 billion in 2023, according to figures compiled by digital media publisher Visual Capitalist, which used Data from the Reserve Bank of India and S&P Global.

Dell, horsepowerLenovo and other major manufacturers have committed to manufacturing their products locally in India as part of the country’s production-linked incentive scheme.

Apple is one of the biggest examples of an American company looking to divert its production from China and source manufacturing from India to avoid facing supply issues with the iPhone and other key products.

Last year, Apple opened its first store in India, highlighting the importance of the market to the iPhone maker’s future. The store, called Apple BKC, is in the populous city of Mumbai.

“We had an all-time record revenue in India,” Apple CEO Tim Cook said on the company’s latest earnings call in November, in response to an analyst’s question about the company’s momentum there. “It’s an incredibly interesting market for us and one of our main goals. We have a low share in a large market, so there seems to be a lot of room for maneuver.”

Apple CEO Tim Cook gestures during the opening of Apple’s first retail store in India in Mumbai on April 18, 2023.

Punit Paranjpe | AFP | fake images

India is also making a big effort to encourage investment from American chipmakers. Last year, the country hosted a major semiconductor industry event, SemiconIndia, where US chipmakers were invited to promote their investments in India and announce new ones.

amdwhat is chasing NVIDIA in the AI ​​chip market, said it plans to invest around $400 million in India over the next five years, including a new campus in Bengaluru that will be the company’s largest design center. AND Micron announced plans to invest up to $825 million to establish a semiconductor assembly and testing facility in the state of Gujarat.

Jack Hidary, CEO of SandboxAQ, which applies AI and quantum computing technology to areas such as cybersecurity and drug discovery, said India is seeing accelerated technology adoption due to inefficiencies in healthcare and other public services. basics.

AI, in particular, offers an opportunity for India to stand out from the rest, Hidary said.

“This is a transformation that goes far beyond even the mobile phone,” Hidary said. After the United States and China began investing in mobile infrastructure two decades ago, “almost everyone in those countries quickly got a smartphone and had access to the web and apps,” he said.

However, “600 million people in India, out of 1.3 billion, still do not have a smartphone,” he said, adding that “that is about to change.”

Hidary said Jio, Indian billionaire Mukesh Ambani’s smartphone company, will serve about 600 million people in India through a $12 device. Ambani, Asia’s richest person, is also in Davos for the WEF.

“It and some other services in India are going to close that digital divide literally in the next three years,” Hidary said. Broadly speaking, India is making a big push for the event because its leaders “know it’s a moment of great transformation,” Hidary said.

Big year for India

It is set to be a crucial year for India in other ways. General elections are scheduled to be held in April-May as Modi seeks re-election.

During Modi’s tenure, major American tech companies, including Alphabet, Goaland Amazon They have made massive bets on India. Amazon invested $2 billion in the country in 2014 and another $3 billion in 2016. Walmart acquired e-commerce company Flipkart for $16 billion in 2018.

In 2020, Meta invested $5.7 billion in Jio, the digital arm of Ambani’s Reliance Industries. Google continued to invest $4.5 billion in the company.

As India has risen, China has faced increasing problems on the world stage, with the United States leading the charge to isolate the world’s second-largest economy, especially when it comes to accessing key technology.

For months, Beijing has been unable to import some of the most advanced chips from American companies such as Nvidia, Inteland AMD.

Ian Bremmer, president and founder of Eurasia Group, told CNBC that India has a good chance of becoming even stronger largely because it is a democracy.

“The good thing about India is the fact that it is a stable country, with a very popular leader,” Bremmer said. “They are about to have an election that will be absolutely uncontroversial, free and fair. And their growth is quite strong.”

Bremmer compared India to the United States, noting that it is a “very decentralized country,” with many states almost competing with each other for investment. He said he could imagine U.S. states eventually adopting a similar approach.

“It’s not inconceivable to me that five years from now in Davos, we’ll see individual states in the United States deciding to do the same thing,” he said. “Texas would be soaking up fossil fuels and sustainable energy if they had a store in Davos this year. And, frankly, California would too.”

—CNBC’s Arjun Kharpal contributed to this report.

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