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SINGAPORE companies should look at the “transformative progress” of India and consider its long-term investment potential – beyond the “viewpoint of the past”, said India’s Minister of Commerce and Industry Piyush Goyal.

His comments come as India has made great strides to develop its infrastructure as well as workforce over the past decade.

“Be it roads, railways, ports, airports, housing or healthcare, we are making unprecedented investments in both physical and social infrastructure,” he told The Business Times (BT) in a recent interview.

In the 10 years since Indian Prime Minister Narendra Modi introduced the “Make in India” initiative, Goyal said that tax reforms and a simplifying of bureaucratic processes have helped improve the ease of doing business.

“To improve ease of doing business, as many as 42,000 compliance requirements were done away with and 3,700 provisions which provided for criminal penalties for minor offences were removed from various statutes to protect small businesses from harassment,” Goyal said.

Some of the provisions that were decriminalised relate to building regulations

This has in part helped push India up the World Bank’s Doing Business rankings to 63rd in 2019, from 142nd in 2014. The global body discontinued the rankings in 2020 and is working on a replacement.

At the same time, the growing middle class is seeking “quality products and services”, and this, said Goyal, offers “immense opportunities” for Singapore companies.

“Singaporean companies need to look at India from this contemporary angle and not from the viewpoint of the past, and think from (a) long-term investment perspective than short-term profit motive,” he said.

To facilitate Singapore companies’ entry into India, the government established an Invest India office – its national investment promotion and facilitation agency – here in September, for which Goyal inaugurated.

“It shows our commitment towards further strengthening economic cooperation with Singapore,” he said.

This comes even as some Singapore companies have already made inroads with “large investments” in India and are “getting rich dividends”, said Goyal. He cited entities such as Temasek, GIC, CapitaLand, Keppel and SIA.

In August, SIA announced a 20.585 billion rupee (S$320 million) foreign direct investment in return for a 25.1 per cent stake in a combined Air India group following its merger with rival Vistara.

Singapore investment company Temasek is recently said to be in talks with India’s largest snack maker Haldiram Snacks for a possible US$1 billion stake in the company.

At the same time, Indian companies are also eager to invest in Singapore, evidenced by the fact that the city-state is its largest trading partner in South-east Asia.

Singapore, he added, is an “important stakeholder” in India’s engagements with Asean.

“Indians have a very positive view about Singapore,” he said, noting that it is an “important hub” for education, connectivity, finance and innovation.

And there is yet more potential for collaboration, said Goyal, as he named a laundry list that includes fintech, advanced manufacturing, infrastructure, industrial parks, connectivity, digitalisation, skill development and green economy.

Noting that India recently announced plans to develop 12 industrial smart cities around the country, Goyal said the government is also keen to welcome Singapore investments in the project, whether from the public or private sector, given its experience in urban development and industrial parks.

Semiconductor partnerships

In September, the two countries inked a series of agreements for further partnership during Modi’s visit to Singapore, alongside a decision to upgrade bilateral ties to a comprehensive strategic partnership.

Among the pacts is one on semiconductor ecosystem partnership.

Currently, several global chipmakers are already present in India – mostly focused on research and development, but not fabrication.

“Our aim is now to make progress in the entire semiconductor supply chain ecosystem,” said Goyal. “We are developing capabilities in front-end fabs, display fabs, semiconductor packaging, compound semiconductors, sensors, and display manufacturing.”

In that regard, Singapore serves as a useful case study, having developed a comprehensive ecosystem over the years.

“We look forward to work with Singapore to learn from Singapore’s experience, explore partnerships between Indian and Singaporean companies and to form a mutually beneficial cooperation with Singaporean companies,” he said.

India’s renewed focus on building its own semiconductor ecosystem suggests that the government may consider injecting fresh funds above the US$10 billion it committed in 2022.

Given the high capital investment required, Goyal said the government is prepared to provide fiscal incentives to overcome the challenges of capital cost.

Beyond investments to set up the necessary “hardware” and “software” for semiconductor manufacturing, Goyal said the money will also go towards infrastructure development – building new roads, rails, ports, power plants and industrial parks.

He added that even if it has “abundant human resources” as the world’s most populous country, the government wants to make sure workers are appropriately skilled.

This makes India an attractive destination for Singapore semiconductor companies looking for further expansion. There are also ample opportunities for Singapore infrastructure companies, as well as tertiary institutes keen to design training courses for the sector.

India’s interest in beefing up its chip sector is part of a broader global trend that has given rise to a subsidy race, as more countries move to build up their own semiconductor expertise and improve their supply chain resilience.

Some analysts have already warned of a possible glut, especially for “legacy” chips, in the next few years, as countries ramp up their chip production.

Asked if he is concerned that demand and prices may be damped by then, Goyal was unfazed.

“There is sufficient domestic demand for the planned production capacities in India,” he said, noting that India is the fifth-largest economy in the world.

“India itself is expected to be a significant customer,” he added. “The domestic market is driven by demand for semiconductors in smartphones, wearables, automotive parts, computers and data storage.”

At the same time, he added that India is working with like-minded partners so that it can contribute to global value chains having “mutually beneficial cooperation” with its partners.

Apart from the agreement on semiconductor ecosystem partnership with Singapore, India has signed similar memoranda of understanding with the United States, the European Union and Japan, he noted.

Still, Goyal acknowledges the challenges involved in developing its semiconductor capability, noting that it is technologically complex, has a high degree of infrastructure requirements and dependence on talent and supply chain.

Nonetheless, he said India has seen “remarkable achievements proving its detractors wrong time and again”.

“Take the example of mobile phones. We were importing almost all phones a decade back,” he said. “Now we make almost all phones that are used in India. Companies such as Apple are exporting ‘Made in India’ phones.”