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The Wolves of Wall Street aren’t coming to London…they’re heading for Mumbai

Most people would accept their fate more stoically: but when Charles Yerkes was wiped out by the Great Chicago Fire of 1871 and then promptly convicted of public larceny, he blackmailed two prominent politicians and President Ulysses Grant pardoned him to keep his mouth shut. Yerkes walked free and went on to build the world’s largest telescope (1892), financed Chicago’s streetcar system (1895) and finally made it to London by 1900. Using methods suspiciously similar to those that got him in trouble in 1871, he built an underground railway line between Baker Street and Waterloo and called it …well, you know what he called it. The Railway Magazine from 1906 grumbled the Bakerloo Line was a “gutter name not to be expected from an English Railway Company”.

Not that Charles Yerkes could have cared less what the public thought: this is the man who told the judge at his trial that he lived by the maxim of “buying up old junk, fixing it up and dumping it on some other fellow” and modern-day commuters packed into his Bakerloo line might find that still has some resonance.

But bear with me, here’s the point: those Edwardian Londoners who objected to Yerkes’ gutter language in 1906 wouldn’t actually have known who to blame because his Bakerloo investment was made through nominee companies to stop it becoming public. By 1927 no fewer than 27% of listed UK companies were owned by American overseas interests, almost none of which were publicly disclosed because of the supposed taint attaching to this brash new brand of capitalism running rampant on Wall Street. British consumers and investors wanted their companies to be homegrown, home owned and home run: most of them would never know how wrong they were.

How things have changed.

Now we have entire Whitehall Departments devoted to drumming up foreign direct investment (FDI) and the wolves of Wall Street are more welcome than ever before, but efforts to attract them over have been stalling over recent years and often failing altogether. FDI into the UK has plummeted since 2016: falling 14% in the year to March 2019 alone, with a 29% decrease in related employment in key sectors including financial services and automotive manufacturing (infrastructure is even worse, dropping by a whopping 40%). And while UK inward investment has slumped equivalent returns for other EU states are showing a relative increase, which might give you a clue to the underlying reasons. It is, as you will have guessed, the “B” word.

Archer Howard, Chief Economic Adviser to the EY Item Club articulated the cause in sober and non-gutter language “foreign companies have become more cautious about investing in the UK due to Brexit uncertainties

Quite so…

Things are very different in India, where crucial FDI policies are starting to reap conspicuously handsome returns.

On the subcontinent FDI is already a major source of non-debt finance with key investment privileges and tax exemptions, not to mention lower wage structures, proving particularly attractive to overseas investors. Figures released by the Department for Promotion of Industry and Internal Trade reported last year’s FDI inflow into India at $ 44.37 Billion: $3.4 Billion of that from the United States, with Singapore coming top of the pack at $ 16.23 Billion. India also came out top on Commonwealth sourced FDI funding so it’s obviously spreading its net wide when it comes to attracting overseas investors, and that’s likely to remain the case for the foreseeable future given the Modi Government plans to secure $100 Billion FDI inflow over the course of the next two years with a range of initiatives including relaxed rules for e-commerce and telecoms enterprises and removal of prior government approval on real estate projects.

Of course, whether that would make it any easier for a modern-day Charles Yerkes to pitch up in Mumbai is, a different matter altogether…

Red Ribbon has been specialising in India’s Markets since the company was founded more than a decade ago, bringing unparalleled expertise to its investment policies on the subcontinent with specialist sectoral advisers working from it’s Head Office in London in conjunction with more than a hundred local experts on the ground in the subcontinent itself. And by drawing on that body of expertise it offers investors an opportunity to secure above market rate returns in this, the fastest-growing large economy in the World.


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Executive Overview

It’s impossible to overstate the importance FDI has for any modern economy, not least because it provides the sort of secure and resilient, non-debt based finance needed to sustain growth without repeated recourse to taxes and public borrowing. And of course India is the fastest-growing large economy on the planet so I’m not surprised to see it placing such an emphasis on FDI initiatives.

Tax concessions and administrative incentives have made the subcontinent a much more business-friendly environment for overseas investors over recent years and further concessions included in the recent Union Budget will now underpin and strengthen that trend.

That’s one of the reasons why I’m convinced there’s never been a better time to invest in India and take full advantage of the opportunities its markets have to offer.

Suchit Punnose

Suchit Punnose / About Author

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