A slowing economy has not dimmed India’s allure in Davos

This report is from this week’s CNBC ‘Inside India’ newsletter bringing you timely and insightful news and market commentary on the emerging powerhouse and big companies behind its meteoric rise. Like what you see? You can subscribe here.

Seven years ago in Davos, Indian Prime Minister Narendra Modi spoke of India’s ambitions to become a $5 trillion economy by 2025.

“The people and youth of India are now ready to contribute to the creation of an economy of $5 trillion by 2025,” he described in his speech at the 2018 World Economic Forum (WEF).

“Not only this, when innovation and entrepreneurship… help (individuals) transform from a job seeker to a job giver, then the number of avenues that will open up for your country and your business can only be imagined,” Modi added.

It is fair to say that meeting that goal has proven difficult.

India’s economy is expected to be close $4.27 trillion this year according to the International Monetary Fund$0.73 trillion short of Modi’s target.

Its slowing economy has raised questions about the country’s high growth targets. Market watchers argue that India is now in the midst of a cyclical slowdown.

However, what is interesting is that India’s story, and its growth potential, continues to attract the attention of investors in India, Davos and beyond.

India is among the The five main territories Where global CEOs surveyed by consulting firm PwC are looking to invest in the next 12 months. The other territories that cracked the top 5 among the 4,700 CEOs surveyed in 109 countries were the United States, the United Kingdom, Germany and mainland China.

Optimism in India has spilled over into the ongoing discussions in Davos.

Speaking to CNBC on the sidelines of this year’s World Economic Forum, Mubadala Investment Company managing director and group CEO Khaldoon Al Mubarak described India as a “very interesting (and) market.”

Among the metrics that stand out for India’s potential are its large but young demographic. Around 480 million Indians are under the age of 18, which is larger than the population of the US, the combined population of Europe, the number of people in the Middle East, as well as the population of South America below at age 18, Mubarak said.

“We have been investing in India… for years, and we continue to work to build our portfolio in India and really get into that wave that has already started,” he said.

This cycle, he added, “will continue, in my opinion, into the future.”

Mubadala’s investments in India include renewable energy Tata Power, owned by the Tata Group, and Trusted Industries-Laza technology backed Jio Platforms.

Prosus, is another investment company that seeks to cash in on India’s growth potential, especially the country’s technology industry.

“You saw the impact of technology in India… and they are saying ‘We are ready for the next step,'” the company’s CEO Fabricio Bloisi told CNBC on the sidelines of the summit.

“Prosus is ready to invest much, much more in India. We have invested like $8 billion there in the last few years and we will invest much more,” he added.

The Indian startups it has invested in include food delivery firm Swiggy, edtech firm Byju’s, Agritech player Dehaat and e-commerce platform Meesho.

Going big on technology

The interest in India, particularly opportunities in its tech and startup space, is in line with the government’s broader focus on developing the sector.

Among the key priorities of the Indian delegation to Davos this year was to deepen its foothold in the semiconductor industry through government incentives and targets.

This includes exploring the development of its own Graphics Processing Unit (GPU) in the next three to five years, Ashwini Vaishnaw, Minister of Railways, Information Technology and Information and Broadcasting. he told CNBC-TV18 on the sidelines of the WEF meeting.

Other projects he revealed include India’s plans to develop 25 indigenous chipsets that are designed and manufactured in the country. It is eager to launch the first chip in September and the first Fab by 2026.

Vaishnaw also outlined the government’s goal of providing underlying computing power with 1,000 GPUs, especially for the benefit of startups that lack access.

This is part of the government’s focus this year to nurture talent and leverage data to create robust data sets to train AI models, he added.

Vaishnaw had led what was reportedly India’s largest delegation to Davos this year, with representatives from eight states – Andhra Pradesh, Telangana, Karnataka, Kerala, Tamil Nadu, Maharashtra, West Bengal and Uttar Pradesh – with each one with each competing for investments for your next initiatives.

For example, Andhra Pradesh Chief Minister Chandrababu Naidu Reportedly showcased the state’s business-friendly policies hoping to attract multinationals like Uneilever, PepsicoGoogle Cloud and Astrazeneca.

Meanwhile, its neighbor Telangana showcased its expertise in electric vehicles, pharmaceuticals and semiconductors. Elsewhere, Maharashtra presented itself as India’s industrial power.

The strong presence of Indian officials in Davos is likely a recognition of the fact that companies, particularly those that have only been around for a few years, need more capital than they can raise domestically.

Foreign investments in the country are “drying up” due to economic policy uncertainty and geopolitical risks, according to Dhiraj Nim, currency strategist and economist at ANZ Bank.

One way forward is for the Indian government to “encourage greater trust by reducing political and regulatory costs, improving the ease of doing business in India,” he suggested.

“There is a lot India can do even if global variables are out of control. India plans to become a developed nation by 2047, so we would need much stronger growth than the 6 – 7% we are getting used to. And growth will have to be realized by making more investments and also strengthening workforce productivity and technological capabilities,” added Nim.

The question of how India plans to continue growing at a sustainable rate, while providing jobs and increasing productivity, is top of mind for the Indian government. In Davos, India’s Minister of Railway Broadcasting, Electronics and Information, Mr. Ashwini Vaishnaw, sat down for discussions with a group of global Indian executives, investors and entrepreneurs. The breakfast organized by Brunswick Group and CNBC on the sidelines of the World Economic Forum, allowed executives and investors to ask questions of the minister and discuss the investment environment in India.

India could reduce its disinvestment target for fiscal 2015. The country’s government is seeking Cut its asset disinvestment and monetization targets by 40%, or to less than 300 billion rupees ($3.47 billion) from 500 billion rupees, for the 2024 to 2025 financial year, the Economic Times reported, citing people familiar with the discussion. Regulatory hurdles and valuation difficulties have proven to be obstacles, but Prime Minister Narendra Modi’s administration has still sold more stake in state-owned companies than previous governments.

The quad convened and reaffirmed their partnership. Foreign ministers from the group, comprising the United States, Australia, India and Japan, met on Tuesday and stressed the importance of preserving a free Indo-Pacific, according to a joint statement issued after talks in Washington. The meeting, hosted by US Secretary of State Marco Rubio on his first day on the job, was meant to signal that countering China was a priority for the Trump administration, analysts said.

Oil prices could rise in India. The United States imposed new sanctions on Russian oil on January 10. As India imports about 40% of its oil from Russia, according to trade intelligence firm Kpler, New Delhi could face a sudden supply crunch. Supply disruptions to India could be up to 500,000 barrels per day, Rystad Energy senior analyst Viktor Kurilov told CNBC. To mitigate the potential oil shock, Indian importers are looking to import oil from suppliers in the Middle East.

Indian stocks traded mixed this week. He Ingenious 50 The index fell 0.03% this week and closed at 23,205.35 points.

Benchmark 10-year Indian government bond yield was flat at 6.78%

On CNBC TV this week, Kumar Rakesh, India analyst at BNP Paribas, expressed optimism in India’s auto industry. India’s exports of passenger vehicles and motorcycles have been growing at a reasonably strong pace in recent years, especially in African, Latin American, Middle Eastern and Southeast Asian markets, Rakesh said. Additionally, Indian automakers have been able to enjoy higher profitability because their domestic production cost is one of the lowest in the world.

Meanwhile, Jose Rasco, HSBC Global Private Banking and Wealth Management America CIO, acknowledged that the Indian market is not cheap, but that is because investors are “paying for quality.” Some features that attract investors to India are its young and diversified economy, a good legal system and increasing productivity in recent years.

Central Bank meetings and big tech gains are in focus next week. Meanwhile, Denta Water and Infra Solutions, a water infrastructure and management company, lists the Indian market.

January 24: India HSBC PMI Flash for January, Bank of Japan meeting, Japan Inflation Rate for December, UK S&P Flash PMI for January

January 29: United States Federal Reserve MeetingDenta Water and Infra Solutions IPO, Meta Platforms, Microsoft and Tesla Earnings

January 30: US gross domestic product for the fourth quarter, European Central Bank meeting, Apple and Intel earnings