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STRATEGY

The Man to Reckon With if You Want to Do Business in India

The U.S. officially can't make up its mind whether India's most growth-friendly minister is a statesman or a demagogue. Businesses have already decided.
Gujarat chief minister Narendra Modi after casting his vote at Ranip during the last phase assembly poll at Ahmedabad on December 17, 2012 in Gujarat, India.
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Remember the name Narendra Modi. The controversial chief minister of one of India’s most prosperous states, Gujarat, last week won re-election for a third consecutive 5-year term. The outcome surprised no one. Indeed, the most heated question, from a business point of view, was whether Modi is ready for a seemingly inevitable run at Prime Minister of the world’s second fastest growing economy.

Modi has won over business owners by making Gujarat—a Nebraska-sized state with Pakistan to the northwest and the Arabian Sea to the south—a haven of good governance and regulatory restraint, in a country that guarantees neither. Over the past few years, some of the world’s largest carmakers, from GM, Ford and Peugeot to India’s own Tata Motors have driven into the state, creating allied opportunities for hundreds of small businesses. More are on their way. “[Modi’s re-election] is a vote for growth,” said Deepak Parekh, chairman of India’s HDFC Bank. “It is a vote for better governance, improvement in quality of life, transparency, integrity.” 

For all those reasons, Gujarat could be the first port of call if you’ve thought of opening up shop or licensing a business in India,. The texture of opportunities is more in tune with that of the West than in many other Indian locales. For example, 43% of the 60 million Gujaratis live in urban centers, compared to 28% for India as a whole. More than 370,000 small businesses dot its entrepreneurial landscape, while some of the nation’s wealthiest entrepreneurs, including the Ambanis, have roots here.

India is a complicated place, however, and there is a dark side to Modi's history in Gujarat. In February 2002, a confrontation between Hindus and Muslims left 1,200 people dead, three-quarters of them Muslim. Modi faced allegations that he was complicit in what amounted to an anti-Islamic pogrom. Although a special investigation cleared him of charges, some critics accuse him of hard-line Hindu nationalism and point out that his right-of-center political party, the Bharatiya Janata Party, put up no Muslim candidate in the Gujarat elections, even though followers of Islam make up 10% of the state's population. Sensitivities over the riot led the U.S. to deny Modi a diplomatic visa in 2005 and again last spring. The U.K. lifted a similar ban in October.

For entrepreneurs looking for opportunities, however, Gujarat remains an efficient and corruption-free business environment, and Modi has made that the centerpiece of his political brand. “No red tape, only red carpet, is my policy towards investors,” Modi says. The most recent "Vibrant Gujarat"--a biennial business fair held in the state capital of Gandhinagar--attracted more than 1,400 foreign businessmen from 101 countries, who promised investments of $450 billion. That next one occurs in just a few weeks, January 11-13, and appears that it will be at least as well attended.

 Oddly, the biggest political risk for an entrepreneur considering Gujarat now may be Modi’s own success. National elections will occur in May 2014; if Modi wants to run for the country’s top political office, he has 17 months in which to find a successor to carry his business-friendly model forward. Since Modi seems to work as a one-man army, there is no obvious successor in the wings. But especially after the election last week, it seems inconceivable that any political heir would mess with Modi’s formula for success.

Last updated: Dec 31, 2012

GAUTAM CHIKERMANE

Gautam Chikermane has been a journalist for two decades. In the last 14 years, he has led large editorial teams in four of India?s largest and most influential publications, decoding the complex, layered and hugely exciting idea called India.




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