Fizz has Gone Out of India

Uncertainties in tax policy, poor infrastructure and lack of clarity are among problems facing investors in India.

“‘Must invest’ means it’s a destination and GDP is growing. ‘Must deal with’ means there are infrastructure issues, the taxation policy is not clear or transparent. So people are saying, ‘Do I have to deal with India?’”

India-born Nooyi, who’s held the top job at PepsiCo for seven years, is still betting on the country as one of the company’s strongest markets.

Issues in India: Nooyi

“You have to fix the whole system,” she said. “Foreign investment can create the push, but the country has to create the pull, and if the country gives the pull, you can get lot of investments.” Nooyi said she asked Chidambaram about the minimum growth rate India needs to remain a healthy economy. “He said we need 8% growth, to stay healthy and come out of chronic unemployment. That’s an attractive growth rate if India can get back to it. That’s the growth rate he would like for India in the long term,” she said.

Nooyi said the fundamental reasons for investing in India haven’t gone away. “The middle class is still growing… You have a thriving striving democracy. Last 15 years, India has seen periods of incredible growth and years of sluggishness here and there,” she said.

“If you look at India, it has a fantastic population base — young, middle class still big and growing, an entrepreneurial culture, thriving democracy, a country that in the long-term still has lots of potential. We have to invest in the long-term fundamentals of the country. Hopefully, if companies keep showing their confidence in India, others will follow and the growth will pick up too.”