India must improve infrastructure and reform business laws to meet the challenge

India will sustain its steady economic growth, but faces considerable challenges in improving infrastructure and reforming business laws, according to speakers at yesterday’s Plastics in India conference in London organised by PRW and EPN.

GDP is forecasted to grow at around 6% to 6.5% per year and historical demand growth in plastics has been around two or three times the GDP growth, said Mahesh Shah, president of Plastindia Foundation. Plastics consumption is just 4kg per person in India, compared with 65kg in western Europe, so there was great potential for plastics businesses. Flexible and rigid packaging was identified as one the biggest growth sectors, along with pipes for irrigation projects.

The country’s greatest assets are its low cost base and the availability of skilled scientists and engineers who speak good English. However, poor transport links and power supply problems were said to be holding back economic growth.

Foreign investment in India has also been stifled by low ratings from agencies such as Standard & Poors, said Helen Hinton, senior international economist at Standard Chartered Bank, which reflected India’s persistently high level of fiscal deficit. India’s present government is committed to making economic reforms, but there were doubts about how quickly these could be achieved. “Everything is moving in the right direction, but it can be a bit slow at times,” Hinton said.

Marie Lall, Indian political and economic lecturer at the University of London, identified the lengthy timescales involved in setting up and closing down businesses as a key problem. “This has to change in the next five years if India is to become the economic force it wants to be.”