Reforms, Politics and Banking

Naina Kidwai, Country Head of HSBC in India and Director, HSBC Asia-Pacific, spoke about the reforms being key to boosting the investment climate in the country. They are seen as powerful signals of intent but are perhaps less significant in economic terms. Subsidies are really crippling India and benefitting those that do need them. The chances of the reforms being carried through are high but States are likely to respond differently. Coalition politics is a reality in India and despite the slowdown and complexities India as a market cannot be ignored.  Foreign investors would do well to factor these in their business plan; States are becoming more relevant than the Centre, while the labour cost is significantly cheaper than in China it more than makes up with the high cost of dealing with poor or lack of infrastructure. Also they need to weigh the merits and demerits of entering sectors (energy for example) where government intervention is significant. The banking activity was not keeping pace with the economic activity and reforms were needed for both domestic and foreign banks.

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