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India Business Forum Conference

Posted by Debasri on 01 June 2008

1 On 24 April 2008, the India Business Forum, one of the most active clubs at London Business School dealing with a wide range of issues related to the region, held their annual flagship conference in London. This year's theme was India: Still Untapped.

Please read below the press release* for this year's conference.

2_2India: Still Untapped

Six and a half years after the publication of Goldman Sachs’ BRIC report that catalysed interest in India, the sixth annual conference of the India Business Forum of the London Business School examined the challenges and prospects for the Indian economy in the current economic climate.

The mood was one of cautious optimism. Martin Sorrell, Chief Executive of WPP, highlighted the regional breadth of the Indian economy and its youthful population as key drivers of growth for multinational corporations. He categorised the country as “underbranded”. This mood of optimism was also echoed by R. Gopalakrishnan, Executive Director of Tata Sons who felt the boom in the economy still lay in the future.

Chandrashekhar Bhave, Chairman of SEBI also suggested that activity in Indian capital markets was likely to grow with the potential for a junior market for small enterprises, foreign listings in India and increased trading in derivative instruments in India.

However, there was a recognition of the challenges faced by the Indian economy. Jim O’Neill, Chief Economist of Goldman Sachs and author of the BRIC report suggested that India was not outperforming the other BRIC economies. Indeed, he felt that there was a need for a greater push in education if India is to achieve its potential.

Most panelists also agreed that valuation of equities and real estate in India was high and that there was likely to be a correction (but not a crash in asset prices). Real estate was seen as vulnerable to price rises in raw materials that exceed the rate of inflation. However, as Ravi Raheja, Group President of the K. Raheja Corporation, pointed out, although returns are likely to be lower than in the recent past they are still good and investors need to manage their expectations. Other panellists suggested that investors may find more attractive returns in tier 2 developers.

Panel discussions also focussed on the politically sensitive retail sector. Vinod Sawhny, President and COO of Bharti Retail, emphasised the breadth of the retail opportunity in India, from the food to the luxury sectors. Panelists like Shashank Singh of Apax Partners acknowledged the macro drivers of growth but felt that current restrictions on foreign investment were impeding growth. Other risks highlighted by the panellists were the low margins and the fact that the retail sector was over-reliant on the metros. Vibha Paul Rishi, Executive Director of PepsiCo, suggested that local retailers were re-inventing themselves and were part of the changes in this sector.

Finally, speakers and panellists discussed the “decoupling” of the Indian economy. Jim O’Neil pointed out that while India was not immune the slowdown, it would probably be less badly affected than the other BRIC economies because much of its demand was locally generated. However, he cautioned that reductions in leverage could affect infrastructure investment and that the budget deficit in India gave the government less room for fiscal manoeuvre than the other BRIC economies to stimulate the growth.

* Acknowledgement to Nikhil Narayanan, MBA2008 for the press release.


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