‘Eurasia Group’ (EG), the Political risk consultancy firm gave a negative outlook to India and Pakistan regarding short and long term investment in 2020. Also, conditions for the rest of South Asia might be a lot worse.
Akhil Bery the lead South Asian analyst of EG unveiled this during a webinar that was organized by the South Asian Society of Economic Reporters (SASER).
Discussing the challenges and opportunities for the South Asian countries and how the countries like Pakistan, India, Sri Lanka, and Bangladesh are seen as potential investment grounds by western investors, Bery revealed that even though India was able to retain its investors’ confidence during the first term of PM Narendra Modi, it was not able to do it since the start of his second term.
“PM Modi has built a reputation as a pro-business and pro-reform politician, and has gone out of his way to engage corporate and CEOs, and has openly met and courted them. The first term helped shaped this idea, especially the bankruptcy reform and the goods and services tax.”
But now the Indian government is more interested in the socio-political issues.
“This is an inherent risk here for investment, especially considering the differences between what the investors were expecting and what the market realities were. Modi’s blueprint for the second term has been the manifesto of BJP (we have abrogation of the Article 370 and Citizenship Act to prove that). Investors did not pay attention to it initially at their own peril. And Modi’s indifference towards the economy has been despite the fact that unemployment was at a 43-year high and GDP growth at a 6-year low. All this and the exacerbation of sectarian tension led us to list India under Modi as one of the top 10 geopolitical risks for 2020.”
Berry further said, “Border war with China is another risk, although it is not a war scenario yet, what if it escalates? Potential blacklisting of Huawei might make sense geopolitically, but from investors’ point of view it just comes off as fluctuating rules.”