SINGAPORE: The rupee's recent plunge has put the spotlight on an economy facing many vulnerabilities – but Singapore companies in India say they are staying put.
India has long been put alongside China as an up-and-coming Asian superpower, but has been floundering of late.
Foreign investors have pulled billions from Indian stocks and bonds on the back of economic uncertainties, while inflation has soared and higher imports have resulted in a severe current account deficit.
The country's currency has fallen in value almost 20 per cent against the US dollar this year, from about 54 in January to 63.7 last Friday.
On top of its economic woes, India has never been the easiest place to do business – accountants and lawyers say foreign investors in the country often come up against bureaucratic challenges.
According to a World Bank report on doing business in India released this year, as many as 12 procedures - including incorporation, permits and government licences – are required to start a business there in comparison with only three required in Singapore.
Abhijit Ghosh, partner and head of the India Desk at PwC Singapore, said the Indian tax environment has always been "complicated and litigious".
"(This is) a clear distinguishing factor compared with its biggest rival, China, and one of the key reasons for India having lost out to China in being a more favoured investment destination," he said.
Low Kah Keong, partner in WongPartnership's India practice, said the firm's clients have found India one of the most challenging countries in the region to do business in – its "infamous red tape" varies across states and sectors. "While clients in China and Indonesia are also confronted with bureaucracy, the issue is less complex and inefficient," he said.
Despite these woes, Singapore companies with a presence in India say the economy still presents long-term opportunities.
Manohar Khiatani, president and chief executive of property company Ascendas, said the company believes in India's long-term growth.
"It has a competitive, qualified labour force and global companies will continue to choose India to conduct their business," he said.
"The country's real estate sector is in its growing phase and we believe key sub-sectors including the industrial, IT and commercial space will continue to see steady demand."
Ascendas owns a number of science, business and technology parks in Indian cities such as Bangalore and Chennai.
Chief executive of Religare Health Trust (RHT), Gurpreet Dhillon, said strong and sustained growth in the Indian health-care sector is being driven by solid fundamentals such as a growing middle class, an ageing population, changing disease profiles and a shortage of hospital beds relative to rising demand.
RHT is a business trust listed on the Singapore Exchange with a portfolio of health-care assets in India.
Alfred Ong, The Ascott's managing director for strategic development who oversees the company's business in India, said there is "huge untapped demand but limited supply" of serviced residences to cater to rising numbers of expatriates and travellers.
The Ascott operates two serviced residences in Bangalore and Chennai, with another five set to open over the next few years.
Benjamin Yap, regional director for South Asia at trade agency International Enterprise (IE) Singapore, said the general consensus about India is still positive, even though the country faces challenges in the short run.
As growth begins to saturate in Tier 1 cities like Mumbai, New Delhi and Bangalore, new opportunities will emerge for Singapore companies in the relatively less-tapped Tier 2 cities such as Pune, Lucknow and Vishakhapatnam – especially in the infrastructure, manufacturing and consumer goods sectors, he added.
"India continues to pursue economic liberalisation, creating opportunities for foreign investors, including Singapore companies...What we are seeing is a short-term issue which should not detract companies from the market's long-term potential.
– By arrangement with ANN/The Straits Times –
