When I head out for a meeting on Investment Trek, my normal pattern is to bring my backpack containing: DSLR camera, GoPro camera, pre-meeting notes, notebook, pen, etc… all the stuff I use to try and capture the content and location of the meeting. Up to this point on my journey, this list of seemingly innocuous supplies hasn’t been an issue (or even much of a thought).
That all changed when I visited the Ministry of Finance in New Delhi. While I don’t speak Hindi, it was clear from their elevated tone, the arrival of additional guards with guns, and the multiple security inspections, scans, and pat-downs that these items in my backpack were not common or approved at the Ministry. I did my best to explain my intentions, but that seemed to only create more confusion and concern.
Eventually, an individual appeared who was able to explain who I was meeting with and why I had the items I did. They reluctantly allowed me to pass through security and I was whisked away into the open-air, labyrinthine corridors of the Ministry of Finance. Note to self – leave the DSLR back at the hotel the next time a government-related visit is on the schedule.
After getting in to the Ministry, I had the pleasure of meeting with Jitesh John (Director, Dept. of Economic Affairs) and Nikhil Varma (Deputy Secretary, Primary Market). We started the discussion with a quick review about the rules and regulations that direct the central government’s role in the markets. Within a few minutes, I was more lost than when walking through the various corridors within the Ministry. India has a complex web of interconnected departments, agencies, and groups which all have some role in regulation.
The central government makes policy for all sectors, but it seems that is where the consistency and ease seems to end. On the implementation side, there are a lot of hands in the pie. The bureaucracy and red-tape to get things done is daunting.
As with all my discussions in India, it didn’t take long to get to Prime Minister Modi and what he represents to this eager nation. My hosts explained that there has never been so much expectation or anticipation for what a leader might be able to deliver as there is with Modi. They highlighted that one of Modi’s areas of focus is to improve the ease of doing business in India. They’re excited about the prospect of this type of change but acknowledge that reforms can’t work overnight and the proof will be in the pudding. I’d describe it as cautiously optimistic.
Tax revenues are higher than projected for this fiscal year, so they’re putting that money to work. India is increasing public investment which is spurring growth in many sectors. They’re recapitalizing banks to the tune of ~$13b. Insurance and pension programs are growing. They’re closing tax loopholes and focusing on minimizing tax evasion. There’s an excitement for what’s happening in India and in isolation, the individual reforms look amazing. In aggregate, however, they recognize it takes time for the type and magnitude of changes everyone is hoping for to truly be realized.
My hosts were insistent that corruption does not exist at the Ministry level. Modi has a zero tolerance approach for corruption and is pushing that agenda from the top down. If the bureaucracy is slowing progress for his important initiatives, Modi looks for solutions to cut the red-tape.
They used a Hindi slang expression to capture the spirit of Modi’s strong stance against corruption. Translated to English, the expression is, “I won’t eat, and I won’t allow you to eat.” This means Modi won’t take part in or benefit from corrupt systems and he won’t allow others to benefit either. They’re not naïve in their view on corruption, however, and acknowledge that in some sectors, corruption is still rampant.
Dramatic progress in some areas while incremental reforms in others – it’s the way India is moving forward.
Special thanks to Brennan Staheli, Peter Johnson, and the Lunt Capital team for their contributions to this report.