Dubai: Expatriate Indians in the Gulf could have a more telling impact on the Indian economy through investment vehicles rather than look for opportunities within the government’s ‘Make in India’ campaign, according to a senior NRI spokesperson.

“Except for a small minority, it would be difficult to break into the manufacturing sector in India, purely because there are few NRI-owned manufacturing businesses in the Gulf and which could be replicated easily in India,” said Paras Shahdadpuri, Chairman of the Indian Business and Professional Council (IBPC). “From that perspective, it made sense for the government to reach out to Indian owned businesses in America or Australia for ‘Make in India’.” (The campaign was launched with the stated purpose of widening the manufacturing base in the country, a sector which had been a laggard for some time now.)

“A better option would be for the Indian government to create ways to utilise the substantial funds available with NRIs in the Gulf,” said Shahdadpuri. “Rather than go to the International Monetary Fund or World Bank for loans that come with strings attached, the government should do more to pull in NRI investments.

“They could do that through investment vehicles such as the Millennium Bonds (which was introduced by the then government to tide over a severe foreign exchange reserves situation in 2000 and which proved immensely popular with Gulf-based Indian expats.)

“There are many NRIs who retain their savings in this market — if Indian banks were willing to offer them 1.5-2 per cent higher rates on dollar deposits than is being offered now. It would attract substantial funds and with longer lock-in tenors. The Indian economy will be a beneficiary and so will NRIs.” (Dollar deposits with Indian banks currently fetch an average 2.67 per cent for a five-year tenor.)

But Sameer Lakhani, a former investment banker, believes likely investments from Indian owned businesses or investors could be channelled into Indian realty in the short term. “While there are many areas that are deserving of priority, perhaps the most significant one is in the area of securitisation of real estate and the allowance of REIT- [real estate investment trust] based structures,” said Lakhani. “This not only unlocks tremendous capital for development and infrastructure, it allows for the retail investor to access and capitalise on the value of real estate growth that India offers.

“Similar moves in China triggered billions of dollars in foreign investment from non-resident Chinese as well as the domestic middle-class citizens. If anything, India should see a greater influx of funds given the opportunities that are on offer.

“Potentially the best prospects could be in the role of infrastructure development and related upstream industries.”

According to Shahdadpuri, movement of NRI investor-owned funds have started to build up, especially in realty projects with a major hospitality component. “These are more likely to be in Tier-2 and Tier-3 cities in India — investing in Tier-A would be too expensive to get into now unless enough funds are available. Moreover, projects in Tier-1 cities entail longer periods for break even, of even 15-20 years in hospitality, for instance.”

It was in 2012-13 that progress was made with the UAE and India reaching an agreement to sign up for a ‘bilateral investment protection’ treaty. “It was the biggest breakthrough in state-to-state ties — UAE based investors needed reassurance that there would be no retrospective implementation of taxes and their rights were protected.

“With the new Indian government, things are starting to move — it’s not yet at a pace everyone would ideally like to see. But it’s still a beginning.”