Red tape hampers India in taking on China: QUIN chair

Ritu Jha-

Thanks to bureaucracy and corruption, India’s still not a viable investment alternative to China, according to Karl Mehta, chair of the Quad Investors’ Network.

Karl Mehta, chair of the Quad Investors’ Network.

He was speaking to indica at a day-long event that QUIN organized, parallel to the Asia-Pacific Economic Cooperation (APEC) meeting Nov. 11-17 in San Francisco. APEC brought together representatives of the US government and major investors from the US, Japan, Australia, and India, the Quad nations.

As part of the effort, Mehta and other major members had a session with Scott Nathan, the CEO of the Development Finance Corporation (DFC) in the United States, which is investing billions in India.

The DFC, the largest investor in India from the US, is a government fund that invests heavily in the Indo-Pacific. At APEC, Mehta represents the United States as a White House appointee.

He is a serial entrepreneur, author, investor, engineer, and civil servant with more than 30 years of experience putting together and funding high-tech companies.

“I’m neutral to all four countries as a chairman. The US, Japan, and Australia are members of APEC, and India will soon become a member,” he said. QUIN was launched earlier this year at an event in Sydney, Australia.

“We held an event at the White House just a few weeks ago, where I brought in 40 CEOs from all four countries,” he said. “We had a round table with Gina Raimondo, secretary of commerce; Kurt Campbell, deputy secretary at the State Department; and Doug Beck, director, Defense Innovation Unit and senior advisor to the secretary of defense. We had several government officials at our meeting to drive our mission, which is to increase the cross-border capital flow between the four Quad nations in critical and emerging technologies, which would help build a resilient supply chain in the Indo-Pacific region.”

According to Mehta, “India has a tremendous opportunity with the Quad and is considered a strategic partner.” He said the Quad’s focus is now shifting from security and defense, which continues as a parallel track with the government, to cross-border capital flow.

“My organization is all about economic cooperation, and technology,” he said. “India can offer great talent because India has an unlimited supply of great talent. India also offers a great investment opportunity for 1.4 billion people who are already starting to consume a lot of goods and services,” Mehta said.

Discussing investments, he cited what Scott Nathan, the DFC CEO, said during his session, about investing about $500 million each in the Tata plant and a solar facility in Tamil Nadu, and a geostrategically important $553 million investment in a port with the Adani group in Colombo, Sri Lanka.

“That’s a part of the Quad because we are looking at our overall region,” Mehta said. “Even DFC, a US government fund, is investing in solar panels in India, it’s not just looking at the Indian demand or India’s ability to export; it is looking at the overall supply chain in the Indo-Pacific region, how to make it more resilient and not depend on countries that are not considered friendly.”

Despite all the talks about US-India cooperation, the two nations are yet to sign a Free Trade Agreement. Mehta said that this issue came up during India’s Commerce Minister Piyush Goyal’s recent visit to the US.

“We have some other bilateral ties like the semiconductor partnership, but we don’t have a comprehensive FTA with India. And it’s not even in the works. No conversation on this issue has yet started,” Mehta told indica.

Asked about India competing with China, Mehta said that it has a short window to set up the capacity to offer the world a good alternative to China, which the West distrusted. “This is the window of opportunity for India. But if India gets bogged down by bureaucracy and can’t set up the infrastructure, it will miss this window. We don’t know whether we’ll see the next window in our lifetime because this kind of opportunity only comes once in a few decades.”

However, Mehta added, “I am extremely bullish with the Modi government because the policies that they have set up are amazing. India’s clean energy policy is one of the most advanced, and the renewable energy sector is booming in India. It already has 100 gigawatts of renewable energy and the government is going to auction tenders for 500 gigawatts. They have put in a national grid infrastructure which even the United States doesn’t have today.”

He was as optimistic about electronics manufacturing in India. The $10 billion of the India Semiconductor Mission is already being put to use. Micron has invested $2.7 billion there. Besides, Tata Electronics has committed to put $10 to $20 billion. Mehta said he believes that in a few years, India will be manufacturing semiconductors to meet both foreign and domestic demand.

QUIN has also been helping Elon Musk’s Tesla work toward manufacturing in India.

“We are aligning them with the expectations,” Mehta said. “The negotiation has been going on for several years. It is just our job to help Quad investors by educating and aligning them to have the right set of expectations so that collaboration, investments, commercialization, and technology transfers can take place. The Government of India is very bullish about Tesla’s plans as Elon Musk has committed that he wants to enter India. Right now, the Indian automobile market is the third largest in the world, in terms of production and consumption.”

According to Mehta, “Bureaucracy is the biggest hurdle for a country the size of India. You can say anything in terms of vision and policy, but actual implementation is the biggest hurdle… One of the greatest initiatives that Prime Minister Modi has started is called ‘Karma Yogi,’ where the 500,000 employees of the central and the state governments all need to be trained in a new way of thinking, working, using technology to work, improving their productivity, and giving them a growth mindset.”

Despite the praise, Mehta admits he wouldn’t even try to get a driver’s license or a birth certificate in India because of the red tape and corruption involved.

He asked how one could compete with China in the 21st century when India called for one to deal with half a million people in a bureaucratic workforce.

“You go to a DMV in India for a driver’s license, it’s still the same,” Mehta said. “Corruption is still there. That is why the transformation that the Karma Yogi scheme is seeking to achieve is critical.”

Mehta said that despite good intent, the country does not meet international standards.

“The good thing now is that every state is competing and we get delegations from every state in Silicon Valley,” he said, describing visitors from Gujarat. Telangana, and Tamil Nadu.

“They know that they have to create that single window of clearance; otherwise, investors can’t come in,” Mehta said. “But even after that single window, when you want to go and get land, power, water connection, permits, and all of that, India is still not at the stage of Singapore or a developed nation like the US where you don’t have to deal with red tape.”

He said that despite Indian authorities claiming that doing business was easier, “necessary change in the approach of bureaucracy is going to be super challenging…. Transforming the mindset of 500,000 government employees, upskilling and reskilling them to make them work like the private sector is the biggest challenge.”

During the APEC event, QUIN also announced on November 14 a collaboration with India’s Epsilon Advanced Materials to build a $650 million battery materials and components plant in North Carolina. This is the first investment an Indian company has made in the U.S. electric battery industry. It is expected to create 500 jobs in North Carolina.

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