Pepsi India investment: Nooyi's comments expose politics of pessimism

The United Progressive Alliance has finally got something to cheer about. PepsiCo, a global major in beverages and snacks, has decided to invest Rs 33,000 crore in India over the next five years.

More encouraging than the commitment to invest are the comments by Indra Nooyi, the company’s India-born chairman and CEO.

In an interview given to Mint, Nooyi has said that the company’s decision to invest is a reaffirmation of its faith in India.

“India is a fundamental growth story irrespective of the short-term slowdown. We are leaning into the growth story. We think this demonstrates our confidence in India,” she has told the Mint.

One of the key attraction for FMCG companies is the growing middle class in India. A report by the National Council for Applied Economic Research’s (NCAER) Centre for Macro Consumer Research in 2011 said India will be a country of 53.3 million middle class households, translating into 267 million people falling in the category, by 2015-16.

This expansion also means increasing consumption. This what PepsiCo is pegging on.

But Nooyi is not all gung-ho about India. She is cautious.

In another interview to The Economic Times, she has said that India has fallen from being a ‘must-invest’ country to ‘must-deal-with’ country.

[caption id=“attachment_899847” align=“alignleft” width=“434”] India has fallen from being a ‘must-invest’ country to ‘must-deal-with’ country, says Nooyi[/caption]

“‘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?’” she has told the ET.

The many scams that happened over the last few years have eroded the business community’s enthusiasm to invest in India. That is how India became a must-deal-with country.

Nonetheless, the fundamental reasons to invest in India have not gone away, she says in the same interview. That is why the company made such a big investment in India.

The decision should be a confidence boost for the fence-sitters among the Indian business. It should also serve as an eye-opener for the Opposition parties, especially the BJP, who continue their high decibel rant about the sorry state of affairs in the economy.

The truth is there are green shoots. There are signs that the government’s efforts to undo some of its past wrongs may be paying off. The trade deficit figures are getting better. This will have a positive impact on the current account deficit, which has been the biggest worry for economists.

Moreover, there are hopes of investment cycle reviving. The Cabinet Committee on Investment has cleared projects worth Rs 3.6 lakh crore in the last few months. The outlook of brokerages and investment bankers for the country is also changing for the better.

Despite all these, the BJP seems to be fixated on the economy-related issues and as the elections draw near its pessimism about the economy is getting deeper.

Indian businesses have also been staying away from committing any major investments here.

Coming in this backdrop, PepsiCo’s huge money will be a confidence boost for the economy and the UPA.

There are both positives and negatives. For long, the focus has been on negatives. Now that there are some positives, it is time to give some credit.

As Nooyi rightly says, PepsiCo is leaning into the growth story of the country.

“We actually think, if more companies start to lean in one by one, India will get back to growth,” she has told the Mint.

And that is the need of the hour.