India’s New Development Sutras

March 4, 2010 Posted by India Briefing Reading Time: 2 minutes

OP/Ed Commentary: Chris Devonshire-Ellis

Chris Devonshire-Ellis with Dhanendra Kumar

Mar. 4 – In discussions with Gajendra Haldea, the advisor to the Deputy Chairman of Infrastructure Planning Commission, and with Dhanendra Kumar, the Chairman of the Competition Commission of India, two things stood out as the mantras for the execution of public-private partnerships.

Firstly, that the Indian government knows full well the constraints it is operating under and that any arrangements must adhere on both government and private sectors to principals of being cost effective, commercially sustainable and affordable, and having time-bound deliverables.

Secondly, that competition will drive India forward, and that “legal certainty” is a prerequisite of a competitive society. The competition issue is of particular note, as is the governments understanding of the issue at the highest levels. India has gone through a period of stagnation and self interests, with corruption rife.

Developments in India’s booming telecommunications sector – a market that is now growing faster than China’s – have led the government to take a stance that competition succeeds where government regulations could not. Despite government regulations to the contrary, without legislation in place to fully open up markets, competitors in India would tend to form cartels and block entrance to other participants, thus resulting in a moribund and underperforming market, despite a government desire to see otherwise.

In throwing the market open to outside investors, the Indian telecoms market was able to exponentially expand, and now offers its subscribers many more features and at some of the lowest call costs in the world.

This new, get-government-out-of-commerce sutra is a major driving force for foreign investors in India. Barriers are coming down, and the government wishes to see infrastructure development perform in the same, competitive manner to rebuild the nation. That, coupled with the previously mentioned, yet sensible fiscal policies over affordability and sustainability are the new mantras of Indian government policy. These make for a welcome change.

Chris Devonshire-Ellis is the founding partner of Dezan Shira & Associates and is responsible for the firm’s activities in India, where the practice maintains five offices and advises on foreign direct investment legal and tax structures into the country. He may be contacted at india@dezshira.com.