'India needs better infrastructure to realise potential'

India needs deregulation and better infrastructure to realise its potential, said Alan Jacobs, senior international economist and strategist at the AMP Capital Investors.

Jacobs said that the three major policies that India will have to give significant thrust upon so that the economy grows and expands at a faster pace would be deregulation, privatisation and foreign direct investments (FDI).

Foreigners still feel India is an unfriendly destination to invest as it is restrictive with many regulations. It is evident that if foreigners want to invest in any country it is because they want to make profits, he said.

FDI brings with it a lot of advantages such as capital, technology expertise, among others, and has a multiplier effect in terms of employment opportunities.

For example, some states in the United States of America go out of its way to give tax concessions for foreign companies to set up shop in their state.

China spends huge sums of money in the development of infrastructure, and therefore the country's infrastructure is better than India. Infrastructure is poor in India, he said.

"It does not pay to come to India, if the manufactured goods cannot be transported from where it is manufactured to the seaport in the fastest possible time," he said , adding, therefore, good infrastructure is considered as a foundation or essential prerequisite for rapid economic growth.

The proceeds from disinvestment must be carefully invested in education, which is investment in human capital, and not used to finance government subsidies. Jacobs commented that India had one of lowest interest rates.

Though in the short run it enables growth, in the long-run it will destablise the economy with excess liquidity and create hyper inflation.

Alan Jacobs scripts AMP Capital Investors' decisions on weighting its investments in major asset classes of domestic company shares, international company shares, among others.