“India has become a much harder sell of late. Even with the introduction of FDI into multi-brand retail, American firms now view India with suspicion. While the negative feelings surrounding the country might be exaggerated, the positive outlook has gone away,” said Vijay Govindarajan, Professor of International Business, Dartmouth College.
The professor, who was previously the chief innovation consultant for General Electric, was in India recently as part of his work in helping American firms adapt to the Indian business climate.
Mr. Govindarajan pointed out that while the opening up of the retail sector was a step in the right direction, the road-blocks that came along the way dampened some of the more positive sentiment.
“American firms primarily feel that they aren’t welcome anymore. However, while the short-term indicators aren’t good, India is still a robust long-term story. Which is what I remind people,” he said.
When asked whether some of the fears of lobbying with regard to FDI were unfounded, Mr. Govindarajan said that it was primarily a mixture of both fact and sensation.
“Some of it is sensationalism, but some of it is real. The heart of the matter is unsure regulation. Even if the rules are bad, it doesn’t matter. When everybody is clear about the rules, then investment will flow. If, for instance, tax codes are changed, then it becomes a problem,” he said.
Talking about the way forward for India, Mr. Govindarajan stressed the need for India to stick to its strengths—namely, what he refers to as ‘process innovation’.
“What India really needs is its population participating as consumers which happens when enterprises innovate on their processes. Look at what Arvind Eyecare has done for the healthcare centre. One needs to be able to provide the product at low prices without sacrificing on quality,” he said.