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Bupa expands in India as rules on foreign investment are eased

Bob Hindle

18th January 2015

News that Bupa has taken a 49% stake in a joint venture with an Indian healthcare provider marks the impact of a new set of legislation going through parliament. The government in New Delhi wants to makes it easier for foreign firms to invest in the country reports the Times of India.

Narenrda Modi’s government has relaxed rules on the stakes foreign companies can own in the insurance industry, the first in a raft of changes seeking to boost competition and investment.

Traditionally India has been a protectionist economy, keen to promote the growth of its home industries rather than foreign firms through a lot of red tape. Both Tesco and WalMart decided to call it quits in recent years. The entry of foreign firms into the domestic retail market is controversial and currently limited, with concerns over the impact on the countries large number of small stores in terms of employment and wage rates.

Modi made his name by creating a model economy in Gujarat that grew more rapidly than all other Indian states. Now the country is demanding the same.

India continues to enjoy a ‘Modi bounce’, with growth at 5.3% and business confidence rising, in part the result of a recent cut in interest rates. There’s an excellent BBC video clip on the costs and benefits of falling oil prices on the Indian economy.

However, the big challenge is to secure jobs for the 50% of Indians who are under the age of 25, especially the increasing number of graduates who can find higher salaries overseas. So there is a real focus on attracting foreign companies. The annual Vibrant Gujarat summit last week was attended by more high profile foreign dignitaries than in previous years, notably John Kerry.

A lot of countries want a piece of the pie, Mr Kerry noting, “The moment has never been more right to tab the incredible possibilities between India & the USA”.

Lord Livingston, the UK Minister for Trade and Development, in this video from the conference, set out a ‘Great Collaboration Campaign’ to boost UK investment in India. A smattering of British firms are there already, notably JCB, Unilever and Vodafone. The process is two way: India invests more in the UK than it does in the rest of the EU put together, notably by Tata.

The Transport for London team have also been giving advice to their counterparts in Mumbai, struggling to control the traffic in one of the most polluted and congested cities in the world, summarised in this piece in The Guardian by Professor Andrew Harris. 91% of journeys are made [bravely] by foot, bicycle or public transport in Mumbai. Skywalks have been produced that help walkers cross congested streets. The much-delayed cross-city Metro opened in 2014.

So 2015 is ‘Watch India’ year, with Modi being likened to Margaret Thatcher and Ronald Reagan in his ability to bring about much needed liberalisation.

Bob Hindle

Economics teacher,examiner and lecturer with several years experience at A/AS, IB and IGCSE. Key interests are in the economics of India and raising social mobility through education.

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