Morgan Stanley Asia is looking at a gradual improvement in the investment activities in India, a top company official said on Wednesday.
Investors have reacted well to recent announcements of Foreign Direct Investment in retail and reduction in subsidy by hiking diesel prices, but high inflation rate and political dynamics ahead of 2014 elections was a matter of concern, said Chetan Ahya, Managing Director, Morgan Stanley Asia.
"Investors have already reacted to the new reforms and the stock market has moved up," said Ahya.
He also highlighted investors' concern about the current account deficit of 4 per cent of GDP (Gross Domestic Product) while Consumer Price Index (CPI) was above 9 per cent level.
"We are looking for a gradual improvement in the investment line because of the issues that the government has in controlling the fiscal deficit," he said.
While ruling out "V-shape" recovery in investment, Ahya underlined the need to look at increasing private investment all over again as was done in 2003-2007 by lifting investment to GDP and cutting fiscal deficit.
"But there is definitely some hope that is building up with the policy action that we saw in September," Ahya said.
"In some ways, the market is indirectly putting pressure on them (the government) and that is why we are getting this policy action," he said.
The investors have also noted the Indian government's understanding of the need to take the investment line-up aggressively to prop up the economy despite political limitations, according to Ahya.
He said the Indian growth story was being held back by high rural wages, which has reduced productivity though it was good for the low income group, high food inflation and a dramatic drop in investments. "All these factors are what we call bad growth mixed environment in India," Ahya said.
The unproductive and or less productive element was going up or was high, in terms of driver to growths, and investment, as a productive element, was going down, he said.
But the investors were really looking for a change in this growth mixed environment to a more positive investment environment, said Ahya at the press conference after the opening of the Morgan Stanley 11 Annual Asia Pacific Summit being held during November 7-9 in Singapore.