Creating more opportunities
between Canada and India
Indian diplomats discuss Canada/India relations at CORIM conference
By Jean-Luc Burlone
Prime Minister Justin Trudeau’s state visit to India made the news on issues unrelated to the purpose of the visit, which was to deepen and broaden relations between both countries with respect to investment, trade, energy and people.
Unfortunately the India trip was almost unanimously derided as ineffective business wise, and ludicrous for its photographic sessions. However, some CBC journalists noted that had the visit would have started with the summit between the two Prime Ministers rather than trivial family sight seing activities, most controversies would have been avoided.
Three topics were discussed: the business outcome, business opportunities that lie ahead and academic and cultural exchanges.
Two diplomats shed a positive light on the aftermath of the Canadian visit to India to an audience of 250 business people attending the CORIM conference on March 13. H. E. Vikas Swarup, High Commissioner of India in Canada and H. E. Nadir Patel, High Commissioner of Canada in India, held a discussion, impeccably steered by the Honorable Jean Charest. Three topics were discussed: the business outcome, business opportunities that lie ahead and academic and cultural exchanges.
Mr. Nadir Patel confirmed that Canadian companies have signed 64 commercial contracts, creating 5,800 new Canadian jobs in the coming years. In addition, six Memorandum of understanding (MOU) and 26 intended new partnerships were signed during the visit. Overall, business agreements are estimated at $1bn.
Mr. Patel underlined the importance a population of 1.366m people carries. He also indicated the increased academic and cultural ties linking both countries as the number of Indian students studying in Canada has tripled in the last three years and Bollywood has agreed to produce nine films in Canada.
‘… numerous investors… who were envisioning India to be the next China, are now facing the fact that India’s middle class has no money.’
Mr. Vikas Swarup commended Prime Minister Narendra Modi’s reforms, that spread a new entrepreneurial spirit to a population amongst which 64% are under 25 years old. The new goods and service tax, for instance, has formalised thousands of small enterprises that were operating in the informal sector.
R&D, innovation and its third rank for the number of start-ups in technology, allow India to excell in renewable energies and to reach its GHG emission goal ahead of schedule. He also reminded the audience of the economic growth rate of 7.2% in 2017.
Both diplomats mentioned how patient foreign investors must be to establish strong and efficient partnerships, and both stressed the importance of a long term (25-30 year) vision. The remembrance of China’s growth during the past 30 years is seen as an example of things to come but rather inappropriately, as the key factor to planning long term investment in India is currently missing.
The discussion failed to tackle the elusive middle class, the essential element to sustain a growing and hopefully inclusive economy. Enthusiasm was extreme a few years ago, when India’s middle class was expected to reach between 300m to 400m people and to grow to over 500m by 2025.
But numerous investors (Apple, Alibaba, Amazon, Facebook, MacDonald, Starbucks, Zara, IKEA, SoftBank, Unilever and many others) who were envisioning India to be the next China, are now facing the fact that India’s middle class has no money. The country did emerge from poverty but not by much because economic volatility, inequality and corruption constrained it.
India’s economic growth fluctuated randomly since 2008, ranging from 23.4% (2010) to minus 1.1% (2012). Furthermore, economic growth is captured by the top 1% of the population and barely trickles down. As a result, the middle class has little or no discretionnary revenu to spend and investors reap about 10% of their expected return.
India is a beautiful and most fascinating country to visit. Business opportunities surely exist for Canadian firms but direct investment is obviously not clear sailing.
Jean-Luc Burlone, Ms. Sc. Economy, FCSI (1996)
Economic Analysis – Financial Strategies
The text above is my personal view, based on the conference and a review of the economic and financial press. March 18, 2018. – JLB
Fellow of the Canadian Securities Institute (FCSI), Jean-Luc Burlone has an excellent knowledge of financial product management and holds a Master’s degree in economics from the Université de Montréal with a dual specialization in development economics and International economy – finance and trade.