Political risk insurance:Expand its coverage to help Indian businesses go global
International news in India at the beginning of 2024 was dominated by a publicized phase of diplomatic tension between India and the Maldives following Prime Minister Narendra Modi’s visit to the Union territory of Lakshadweep. This was followed by an order by the government of Maldives asking Indian troops to leave the archipelago nation. However, this wasn’t the first time the relationship between the Maldives and India has been disturbed.
If we go back a decade, in 2013, Malé had asked Indian infrastructure giant GMR to leave. After protracted arbitration, GMR was awarded $270 million in 2016 against claimed losses of $800 million. Jindal Steel faced a similar fate in Bolivia when it had to walk out of a multi-billion-dollar project following a scandal over encashment of bank guarantees by the Bolivian government.
The Indian company was awarded $22.5 million against claimed losses of over $100 million. Given such instances, Indian industries wanting to spread their wings beyond Indian shores have been seeking political risk insurance (PRI). Despite market demand for PRI, the question is whether this should be a significant policy matter, given the robust growth of India’s economy and growing set of domestic and international investors.
There is general euphoria about the India story and the arrival of Amrit Kaal—a propitious phase for turning India into a developed country. The continued buoyancy of Indian markets in the wake of the covid pandemic, slowdown in China and conflicts in Ukraine as well as Palestine has demonstrated the confidence of investors in the India story. Strong domestic markets, of course, are indispensable to a robust economy.
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