India goes all out to court foreign investors

India: Open for business?
India: Open for business?   

First came "Made in China" – now India's government hopes "Make in India" will boost investment into the country and turn it into a global manufacturing hub.

The bid to woo foreign investors was in focus this week, as India was the partner country for Hannover Messe – the world's biggest industrial technology fair, held in Germany.

"There are three main messages here," Jochen Kockler, a member of the Hannover Messe board, told CNBC at the trade fair this week.

"One is that the new administration in India will improve infrastructure; the second is that it will invite foreign investors and show India as a sustainable and reliable partner; and three, export Indian products to the world," he said.

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A creaking infrastructure, slow economic reforms, bureaucracy and red tape have all held back investment into India, Asia's third biggest economy, in recent years, analysts said.

Krisztian Bocsi | Bloomberg | Getty Images

These are issues India's Prime Minister Narendra Modi, who swept to victory in elections almost a year ago, is desperately trying to address.

The "Make in India" campaign was launched last September by Modi's government, which also delivered cuts to corporate tax and increased spending on infrastructure in a recent budget.

Modi made a high-profile visit to Hannover Messe and highlighted some of his other aims, including a $100-billion investment in renewable energy and plans to build 100 new "smart cities."

There are signs that renewed optimism in India's economic outlook is having an impact – the country's stock market is up almost 26 percent over the past year. Foreign direct investment inflows, meanwhile, totalled $14.1 billion in the first five months of the 2014-15 fiscal year, up almost 34 percent from the same period in 2013-14.

Wait and see?

This marks a contrast to 2013 when India's currency hit a record low against the dollar and local markets took a beating. A rout in emerging markets, triggered by fears of the end of quantitative easing by the U.S. Federal Reserve, focused attention on India's sluggish economy.

German delegates at the trade fair said they were upbeat about India's investment push, but were keen to see further signs of reform from New Delhi.

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"India is a partner country… we're waiting for an impetus for big investments," said Heinrich Frontzek, vice president for corporate communication and future concepts at German automation firm, Festo.

Germany is India's largest trading partner in Europe and has consistently been among India's top 10 global trade partners.

Making life easier for businesses to operate is high on the Indian government's priority list. The country ranks 142 out of 189 economies on the World Bank's ease of doing business index – behind regional giant China, which ranks at 90.

While there has been disappointment in the past with India's ability to attract foreign investors, change is in the air, said Deepak Bagla, managing director and CEO of Invest India, which promotes and facilitates investments into India.

"A lot has been done and a lot more has to be done," he said. "There is a structure – for example with smart cities, the land has already been allocated. We've broken up the mountain into small parts."

Deal time

Indian media reported on Wednesday that public sector firms had signed six memoranda of understanding with companies from Germany, Switzerland, Russia and Bulgaria in Hannover, although Bagla said it was too early to comment on the size of any investment deals.

"This has been a good platform for us. We have received five proposals for investment in hydro power generation and the tourism sector this week," said Tilak Sharma, deputy director at Emerging Himachal, an investment promotion body for the northern Indian state of Himachal Pradesh.

The last time India partnered with Germany at Hannover Messe was in 2006. India's participation generated total business worth $1.3 billion and only time will tell if Modi's high-profile campaign has helped top this figure.