Go India!

All observers agree that India has a tremendous growth potential-in terms of its economy as well as its weight in global affairs. India will be among the nations shaping tomorrow’s world. NIB is here to help companies in the member countries to map their way to the country of growth.

The interveiw with Søren Kjær Mortensen, Head of Asia (until 2008) at NIB, and Dr Anand Sethi, the Bank’s advisor based in New Delhi, to discuss opportunities for Nordic and Baltic companies on the Indian market.

What opportunities can India offer NIB’s member countries?

Dr Anand Sethi: Since 1991, India has been gradually opening up its markets and carrying out economic reforms reducing government controls on foreign trade and investment. The Indian economy has grown steadily over the last two decades. This has led our country to become the twelfth largest economy in the world.

Global economy analysts expect India to be the world’s third largest economy within thirty years. With its economic growth above 9% on the back of foreign investment and an extended programme of economic liberalisation, India is advancing through the rankings, and in fact, is the fastest growing democracy among the top twelve.

India has capitalised on its large pool of educated, English-speaking people and has become an important outsourcing destination for multinational corporations. India has also become a major exporter of software as well as financial, research, and technological services.

We are seeing something extraordinary and I hope it will last. What is important is that this growth is achieved in a free and democratic society. If we compare India’s economy to that of China, we have to keep in mind that India started the liberalisation of its economy some twelve years later than China. All in all, India is a very significant economy that represents a huge potential for NIB’s member countries.

What is of particular interest to India in the technologies and sectors where Nordic and Baltic companies are strong?

Dr Anand Sethi: The No. 1 area is infrastructure, including the power sector, telecommunications, seaports, airports, and roads. There are many Nordic companies involved in these sectors. India will also need to tap its renewable sources of energy to withstand global warming, which will make our country the largest market for wind and solar energy.

Secondly, what India enjoys that no other major country in the world has, is a growing working age population. The Indian labour force today amounts to more than 500 million. A plentiful supply of Indian workers will help the country maintain its growth rates. This is a young population with growing demands and spending power.

We are witnessing the growth of income and savings. With a growing middle class, internal consumption will most definitely continue booming for many years ahead, and India will experience a great revolution in the retail sector. This will open up immense opportunities for grocery and consumables supermarkets, home furnishings, DIY-type stores, etc.

India is in need of Nordic and Baltic investments and technology deliveries in health care, including hospitals and spas, and in the pharmaceutical business. The training and education sector, which is related to the growing young population, also provides opportunities for NIB’s members.

It is also worth mentioning India’s growing taste for engineering, IT, design and modern agricultural techniques, the areas in which companies from Nordic and Baltic countries would have their say in the Indian economy.

The telecommunications sector, in which Finnish and Swedish companies are major suppliers in India, has been a Nordic domain for at least a decade. In the port sector, companies from Finland and Sweden enjoy a very substantial and growing market share. Norwegian companies are strong in the aluminium industry and in equipment supplies for sea shelf oil extraction. Besides large investments in harbour infrastructure and the container business, many Danish companies are involved in engineering, the food industry, pharmaceutical manufacturing, finance and consulting.

How do you see NIB’s role in financing projects in India?

Søren Kjær Mortensen: NIB signed its first Memorandum of Understanding with the Indian government in 1986. Since then, this country has become a significant market for the Bank outside the member countries.

Initially, NIB provided financing for projects backed by an Indian sovereign guarantee. In recent years, NIB started extending financing to corporations and financial institutions in the private sector. With more focus on project or structured finance transactions in this country, the Bank is now pursuing various opportunities within infrastructure, especially the energy sector. India needs new power generation capacities. This is an area in which companies from NIB’s member countries can offer advanced technologies.

When we tell customers that NIB is an attractive lender, we also draw their attention in particular to the longer-term maturities we offer for projects in both the public and private sectors. We seek to lend directly to eligible projects. NIB’s financing supplements loans from other financial institutions and commercial banks.

Dr Anand Sethi: Small and medium-sized enterprises (SMEs) also comprise an important segment in which NIB could play a significant role. SMEs, especially in specialised technology areas, such as hi-tech and software, bio technologies, art and design, have a very good potential and will develop at the same pace as the economy in general, or even faster due to their natural dynamism.

In terms of the advantages NIB has in India, I would like to highlight the Bank’s speed of response and its flexibility in making financing decisions. NIB is significantly less bureaucratic than other major bilateral and multilateral institutions. NIB addresses the needs and requirements of the public sector, which many commercial credit institutions are not always able to do. In my opinion, this is a major advantage in India. NIB is a supportive financial institution that stays away from resorting to the petty control of its borrowers.

What is the current status of NIB’s operations in India?

Søren Kjær Mortensen: NIB finances a number of Indian enterprises and their Nordic-related projects through intermediaries, such as the Industrial Development Bank of India, and SREI Infrastructure Finance. Loans provided through other intermediaries have been approved and are currently going through the final negotiation stages. Projects financed through NIB’s cooperation partners have focused on a wide range of sectors, including manufacturing and infrastructure in general. The Indian government has approved a master plan for the infrastructure sector. This is resulting in increasing demand for supplies of modern equipment and advanced technologies.

The 2006 results show that India hosted EUR 113 million of NIB’s loans outstanding, which is modest, but this will undoubtedly increase significantly in the next few years. Apart from the energy sector, we are also pursuing other opportunities in infrastructure, including on-lending through and co-financing with Indian financial institutions focusing primarily on infrastructure. For the infrastructure sector alone, it has been estimated that India has the potential to absorb USD 150 billion in the next five years.

We have a good team dedicated to expanding our activities in India. Anand offers inspiration to us all with his in-depth knowledge of not only Indian capabilities but also those of NIB’s member countries, and a fantastic network. We would be very pleased to play even a modest role in helping to strengthen the competitiveness of NIB’s member countries in obtaining contracts in India.