World Economy

Modi Draws $53b in Loans, Investments

Modi Draws $53b in Loans, InvestmentsModi Draws $53b in Loans, Investments

A bear hug, a riverfront stroll and a swing-set session helped Prime Minister Narendra Modi win more than $53 billion in loans and investment pledges from China and Japan this month. He’ll need to make progress on cutting India’s red tape to turn those promises into reality.

Chinese President Xi Jinping yesterday in New Delhi pledged $20 billion in investment for Modi over the next five years to narrow India’s largest trade deficit with any single country. That adds to the $33 billion in loans and investment Japanese Prime Minister Shinzo Abe promised on Sept. 1, Bloomberg reported.

Modi’s ability to draw funds from Asia’s two biggest economies is crucial to meeting his $1 trillion investment target by 2017 to revive Indian growth lingering near a decade low. Doing so will require him to streamline a bureaucracy that held up more than $350 billion in projects under former prime minister Manmohan Singh, who lost power to Modi in May.

“It’s very difficult to pinpoint a number which these countries can reach because of the economic climate,” Siddhartha Sanyal, chief India economist at Barclays Plc, said by phone from Mumbai. “India needs to prioritize removing of the bottlenecks so that it can compete.”

During a 2010 visit to India, former Chinese premier Wen Jiabao signed pacts valued at $16 billion, including $10 billion in equipment sales from Shanghai Electric Group Co Ltd. for three Reliance Power Ltd. power plants. Since then, units of one plant have been commissioned while the others are stalled due to lack of fuel and land permits.

 Red Tape

Japanese and Chinese foreign direct investment to India has totaled $17.5 billion since April 2000, with just $410 million of this from China. More than doubling that in the next five years will require a complete overhaul of India’s investment climate, said C. Uday Bhaskar, a distinguished fellow with the Delhi-based Society for Policy Studies.

“India’s capacity for being able to ingest and take in this kind of investment is limited,” Bhaskar said by phone from Delhi. “India needs to acquire that capacity and do so in a speedy manner. They have not demonstrated that ability yet and remain mired in red tape and procedural delays.”

Singh formed a committee in June 2013 to clear 463 blocked investments worth 22 trillion rupees ($362 billion). While 176 proposals worth 6.48 trillion rupees have been approved so far, only 60 have begun construction, said Anil Swarup, who heads the committee, known as the Project Monitoring Group.