As investment campaigns go, Indian Prime Minister Narendra Modi’s “Make in India” brainchild had a launch that was literally out of this world.
The campaign, designed to woo global investors to the country for manufacturing needs, opened on the heels of a successful Mars orbiter mission that not only admitted India to the exclusive club of nations with spacecraft orbiting the Red Planet—only Europe, Russia and the U.S. have done so thus far—but did so at a fraction of the cost of the latest probe from the U.S.
Modi, who swept to electoral victory on promises of more jobs and a rebuilt Indian economy, has a lot of work ahead of him to deliver on those promises. But the successful Mars mission offered a sterling example of how Modi is marketing his homeland to the world.
Mangalyaan, the spacecraft India sent to Mars, not only successfully entered orbit on its first try on Sept. 24, but cost just 11% of the price of the U.S.’s Maven probe. While the U.S. spent $671 million on Maven, which got to Mars only two days before Mangalyaan (Hindi for “Mars craft”), the latter only cost $74 million—a low price tag that exemplifies what Modi is offering to global businesses: a low-cost manufacturing environment. In fact, he touted the mission’s budget as less than the budget for the Hollywood movie Gravity, which starred George Clooney and Sandra Bullock and cost approximately $100 million to make.
However, there’s more to wooing businesses than low labor costs, and Modi will have some headwinds to face. Legal and regulator environments must also be hospitable, and there the country has lagged, including those that worked on the Mars mission, to collaborate with global corporations.
Stil, Modi, in the launch of “Make in India,” which premiered on Sept. 25, is promising that businesses will find a very friendly atmosphere for manufacturing operations, with changes in the works to make it easier for companies to bring projects to India. The government has already relaxed the cap on foreign direct investment in some areas, such as construction, defense and railways.
Modi has also promised infrastructure improvements necessary to enable the success of such projects, something India sorely needs, along with the jobs that could follow a successful campaign. With a population of 1.2 billion, and 13 million young people looking to join the workforce annually, the economy is struggling to provide enough work for enough people to ameliorate its poverty level of 700 million. Modi also touted three reasons investors should be attracted to the country: democratic values, a young and growing demographic and strong demand.
Chinese President Xi Jinping visited India for the first time in mid-September, and announced forthcoming investments of $20 billion in the country—but with tensions still simmering over the Himalayan border between China and India, some in India were not as cheered over the news as they might otherwise have been.
Considerably more enthusiasm has surrounded Modi’s trip to the U.S., which was scheduled to include a speech before the U.N.’s General Assembly and a reportedly sold-out major address at Madison Square Garden but also meetings not just with President Obama and Vice President Biden, but also the heads of numerous major U.S. corporations.
But Modi’s own past has some pretty big clouds to overcome, after an anti-Muslim pogrom in 2002 in Gujarat, where he was chief minister. Accusations that Modi at the very least stood by and did nothing while more than a thousand people were killed and Muslim businesses and homes were destroyed resulted in the U.S. denial of a visa to him in 2005. It is only since his move up to prime minister that his entry into the U.S. has been permitted—since India is strategically important to the U.S.
There is also concern that he might weaken labor laws in a promised reform and toss out environmental concerns—an area in which his record is notoriously weak—in his drive to boost the country’s manufacturing sector.
But little of that was heard on the day of the “Make in India” campaign launch. Major business leaders joined Modi in the launch, urging him to cut the country’s bureaucratic red tape and to streamline tax regulations so that companies have an easier time of it. Corporate executives from Tata Group boss Cyrus Mistry to Reliance Industries Chairman Mukesh Ambani put in appearance for the event, and Chanda Kochhar, CEO of ICICI Bank, was cited in reports saying that 900,000 manufacturing jobs could be added over the next 10 years.
And there’s the rub: it could take 10 years, according to John Blank, chief equity strategist for Zacks, for Modi to keep the promises he made. While “there is no question that India should have a manufacturing base on par with China,” Blank said, governmental bureaucracy is getting in the way. While Modi is a “super strongman,” capable of pushing through change, Blank said, “there’s a reason that they have [only] 12% of their GDP in manufacturing. It’s a pain in the neck to work there. How soon will it change, how long will it take?”
The Mars mission, Blank said, will have to be the first in a string of successes. “If he’s smart, he’ll have a lot of small victories packed in up front like [the Mars mission] to keep him in power, because to get to 25% [of GDP in manufacturing] might take a decade. He has to stay in.”
Should he succeed, Blank said, energy and food should prove to be rewarding investments, since in an improving economy people will be working to eat better and will need more energy for business and for consumer-driven consumption.
India can be a cheap momentum play, given the current state of the BRIC economies, Blank said, and is “definitely the number-one pick” among them. Putin has “destroyed any interest in Russia,” he said, and while anticorruption moves in China are a good sign that BRIC nations are aware that they “have to fight corruption and get the government under control to get investors,” Modi will have to prove the Indian government is serious about following through.
Modi seems determined to do just that. “Be assured you will not lose your money,” he told industrialists in his campaign launch speech. “I tell the world, ‘Make in India.’ Sell anywhere but manufacture here. We have the skill and talent for it.”