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India must cut red tape for investors, says Mubadala executive

UAE President Sheikh Mohamed bin Zayed Al Nahyan and Indian Prime Minister Narendra Modi met last year to improve trade relations, but red tape still hampers investment via Reuters
UAE president Sheikh Mohamed bin Zayed Al Nahyan and Indian prime minister Narendra Modi met last year to improve trade relations, but red tape still hampers investment
  • Approval processes too slow
  • FDI $33bn in H1 2024
  • 1,500 outdated laws revoked

Reducing red tape is critical to making India more attractive to global investors, an executive at Abu Dhabi’s sovereign wealth fund Mubadala has said.

Sridhar Iyengar, chief financial officer of Mubadala’s Aerospace, Renewables and Information Communications Technology business, said the New Delhi government must enhance its bureaucratic efficiency to improve the pace at which projects can move from agreement to execution. 

Despite notable improvements in India’s regulatory and tax frameworks under prime minister Narendra Modi’s administration, Iyengar said investors still face challenges with protracted approval processes.

Speaking at the India-UAE Business Forum in Abu Dhabi this week, Iyengar said Mubadala, which has invested around $8 billion in India, experienced delays in its infrastructure and renewable projects.

In 2023 the sovereign wealth fund, along with other partners, invested in Tata Power Renewables and Cube Highways Trust, an infrastructure investment trust in India.

“It was nothing to do with the government, nothing to do with the legal [or] tax [framework], but the approvals that one needs to get, which is the execution side, that took its own sweet time,” Iyengar said. 

“I had to make personal calls to the UAE ambassador to India, and the Indian ambassador to UAE, and they had to work behind the scenes to make things happen at a faster pace.

“Now, if that is what a sovereign wealth fund [faced], think about non-government companies that want to bring investment.”

Foreign direct investment (FDI) in India is growing – $71 billion was recorded in the 2022-23 financial year and $33 billion in the first six months of the current financial year.

But Iyengar said the execution arm of India’s investment framework needs to be made more efficient.

India’s economy

Economic growth and unemployment are among the pivotal issues as India prepares for its upcoming general election.

But the country has made significant strides in attracting foreign investment since Modi’s 2014 election. FDI inflows rose from an average of $27 billion in the seven years before his tenure to more than $47 billion annually in the subsequent nine  years. 

Despite these gains and a projected GDP growth of close to 8 percent, criticisms persist regarding Modi’s protectionist policies and their impact on foreign businesses.

Investment from India into Gulf countries has dropped considerably despite growth in bilateral trade.

The administration has initiated radical reforms over the years such as the “Make in India” programme, which allows for approval of 100 percent FDI, to shift India away from its protectionist stance of the 1990s when nearly all business activities needed government permission, benefiting a select group of insiders.

Other measures to enhance the ease of doing business, such as eliminating 39,000 compliances and 1,500 outdated laws, have also been implemented. 

However, FDI has still declined over the last two years.

India has sought investments from Abu Dhabi Investment Authority and Mubadala in various areas, including renewable and digital sectors.

In February ADIA, the UAE’s largest sovereign wealth fund, said it will set up a $4 billion to $5 billion fund in India’s latest special economic zone, Gujarat International Finance Tech-City (Gift City).

The UAE is the seventh-largest investor in India with an estimated investment of $18 billion.

Modi in February completed a two-day visit to the UAE – his seventh since becoming premier – in which deals were signed to expand cooperation on trade, investment, energy and technology.

Results of the Indian general election will be announced next month.

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