The economic slowdown has not dampened India’s appeal at Davos

This report is taken from this week’s Inside India newsletter from CNBC, which brings you timely, insightful news and market commentary on new power and the big businesses behind its meteoric rise. Like what you see? You can subscribe here.

“People and youth of India now ready to contribute to the creation of the economy $5 trillion by 2025,” he said in a speech at the World Economic Forum (WEF) in 2018.

“Not only that, if innovation and entrepreneurship … help (individuals) transform from job seekers to job providers, you can only imagine the avenues that will open up for their country and your business,” Modi added.

It’s fair to say that this goal proved difficult to achieve.

India’s economy is predicted to be around 4.27 trillion dollars according to the International Monetary Fund this year, $0.73 trillion short of Modi’s target.

His economic slowdown raised questions about the country’s lofty growth goals. Market watchers say India is now in the midst of a cyclical slowdown.

What is interesting, however, is that India’s story – and its growth potential – continues to attract the attention of investors in India, Davos and beyond.

India is included top five areas where global CEOs surveyed by consultancy PwC want to invest over the next 12 months. Other territories that made the top 5 among the 4,700 CEOs surveyed in 109 countries were the US, UK, Germany and mainland China.

Optimism about India has been reflected in the ongoing discussions at Davos.

Speaking to CNBC on the sidelines of this year’s World Economic Forum, Khaldun Al Mubarak, Managing Director and Group CEO of Mubadala Investment Company described India as “a very, very interesting country (and) a very interesting market”.

Among the indicators of India’s potential that stand out for him is its large but young demographic. About 480 million Indians are under the age of 18, more than the population of the United States, the total population of Europe, the number of people in the Middle East, and the population of South America under the age of 18, Mubarak said.

“We’ve been investing in India … for years, and we’re continuing to work on building our portfolio in India and really getting on that wave that’s already started,” he said.

This cycle, he added, “will continue, in my opinion, and beyond.”

Mubadala’s investments in India include Tata Power, a renewable energy company owned by the Tata Group Reliance Industries Companybacked by tech giant Jio Platforms.

Prosus is another investment company looking to capitalize on India’s growth potential, particularly in the country’s technology industry.

“You’ve seen the impact of technology in India … and they’re saying ‘we’re ready for the next step,'” the company’s CEO Fabrizio Bloisie told CNBC on the sidelines of the summit.

“Prosus is ready to invest much more in India. Over the past few years, we have invested about $8 billion there and will invest much more,” he added.

Indian startups that Prosus has invested in include food delivery firm Swiggy, technology firm BYJU’s, agri-tech firm Dehaat and e-commerce platform Meesho.

Developing on technology

The interest in India – particularly the opportunities in its tech and startup space – is in line with the government’s broader focus on developing the sector.

Among the key priorities of the Indian delegation at Davos this year was deepening its position in the semiconductor industry through government incentives and targets.

This includes exploring the development of its own graphics processing unit (GPU) in the next three to five years, Ashwini Vaishnav, Minister for Railways, Information Technology and Information and Broadcasting. told CNBC-TV18 on the sidelines of the WEF meeting.

Other projects he revealed include India’s plans to develop 25 indigenous chipsets designed and manufactured in the country. He is looking forward to the first chip by September and the first production by 2026.

Vaishnaw also outlined the government’s aim to provide a core computing power of 1,000 GPUs, especially for the benefit of underserved startups.

He added that the government this year is focused on developing talent and using data to create robust datasets to train AI models.

Vaishnav led what was reportedly India’s largest delegation to Davos this year, which included representatives from eight states: Andhra Pradesh, Telangana, Karnataka, Kerala, Tamil Nadu, Maharashtra, West Bengal and Uttar Pradesh, one each vie for investment for their future initiatives.

For example, Andhra Pradesh Chief Minister Chandrababu Naidu reportedly showcased the state’s pro-business policies hoping to court such multinationals Unilever, PepsiCoGoogle Cloud and AstraZeneca.

Its neighbor Telangana, meanwhile, has showcased its expertise in electric vehicles, pharmaceuticals and semiconductors. Elsewhere, Maharashtra has reportedly introduced itself as Industrial power plant.

The large presence of Indian officials at Davos is likely a recognition of the fact that companies, especially those that have only been around for a few years, need more capital than they can raise domestically.

According to Dheeraj Neem, currency strategist and economist at ANZ Bank, foreign investment in the country is “drying up” due to economic policy uncertainty and geopolitical risks.

One way forward is for the Indian government to “help build trust by reducing political and regulatory costs, improving the ease of doing business in India,” he suggested.

“India can do a lot even if global variables are out of control. India plans to become a developed country by 2047, so we will need much stronger growth than the 6-7% we are used to. And growth will have to to be realized through more investment, as well as improved labor productivity and technological capabilities,” Nim added.

How India plans to continue growing at a sustainable pace while providing jobs and increasing productivity is a top priority for the Indian government. In Davos, India’s Minister of Railways, Electronics and Broadcasting, Mr. Ashwini Vaishnav, sat down to discuss with a group of global leaders, investors and Indian entrepreneurs. The breakfast, hosted by Brunswick Group and CNBC on the sidelines of the World Economic Forum, allowed executives and investors to ask the minister questions and discuss the investment environment in India.

India may reduce disinvestment plan for FY25. The country’s government strives reduce its disinvestment and asset monetization targets by 40% — or to less than 300 billion rupees ($3.47 billion) from 500 billion rupees — for the 2024-25 fiscal year, The Economic Times reported, citing people familiar with the discussions. Regulatory hurdles and valuation difficulties have proved to be obstacles, but Prime Minister Narendra Modi’s administration has still sold more shares of state-owned companies than previous governments.

Quad gathered and confirmed their partnership. Foreign ministers from the group, which includes the United States, Australia, India and Japan, met on Tuesday and stressed the importance of maintaining a free Indo-Pacific region, according to a joint statement issued after talks in Washington. The meeting organized by US Secretary of State Marco Rubio on his first day on the job was to show that The fight against China was the top priority of the Trump administrationanalysts note.

Oil prices in India may rise. The US imposed new sanctions against Russian oil January 10. With India importing about 40% of its oil from Russia, according to trade intelligence firm Kpler, New Delhi could face a sudden supply shortfall. There may be disruptions in supplies to India up to 500,000 barrels per dayViktor Kurilov, senior analyst at Rystad Energy, told CNBC. To mitigate a possible oil shock, Indian importers are looking to import oil from suppliers in the Middle East.

Indian stocks traded mixed this week. The Excellent 50 the index fell by 0.03% this week and closed at 23,205.35 points.

India’s benchmark 10-year government bond yield remained flat at 6.78%

Speaking on CNBC this week, Kumar Rakesh, India analyst at BNP Paribas, spoke optimism on the Indian automobile industry. Indian exports of passenger cars and motorcycles have been growing at a fairly high rate in recent years, especially in the African, Latin American, Middle East and Southeast Asian markets, Rakesh said. Moreover, Indian automakers have been able to gain greater profitability because domestic production costs are among the lowest in the world.

At the same time, José Rasco, IT director of HSBC Global Private Banking and Wealth Management Americas, admitted that the Indian market is not cheap, but that is because investors “pay for quality.” Some features that attract investors to India are its young diversified economy, good legal system and productivity growth in recent years.