Prime Minister Narendra Modi’s relentless pursuit of foreign direct investment (FDI), reflected even in his recent visit to Malaysia and Singapore and the assurances given, need to be matched in implementation at the ground level. Whilst India is the most attractive investment destination globally, and particularly among the emerging economies, it is not getting inflows concomitant with Mr Modi’s zeal (visiting nearly 20 countries since he took over as PM) and the huge turnouts at his meetings abroad. His eloquence in his latest promise to investors in Singapore — with which India now has a “strategic partnership” — and Malaysia is unmatched as he assured investors: “I am there to carefully hold your hands.” He was realistic enough to admit he was conscious of last-mile operational issues and said his government was fine-tuning the FDI norms that had made India the most open economy in the world.
These are indeed brave words, but the last mile, as investors are finding out, is full of hurdles. For instance, the latest Kroll global report on fraud reveals that 25 per cent of Indian companies (compared to 11 per cent globally) said they were victims of corruption and bribery, a marginal increase from two years ago. Bureaucratic red tape, too, is still very much around. A Paris-born billionaire who invested $200 million in India complained of regulatory hurdles. He feels India is unnecessarily bureaucratic. Ironically, Mr Modi seemed pleased that a large number of Indian companies are registered in Singapore. But the reason is that these companies find it easier to operate out of Singapore than from India.
Many big companies had shifted base from India to Singapore to avoid regulatory hassles. This is the general complaint of investors and it needs to be addressed seriously. India should not be complacent because one foreign media house reported that India got 40 per cent more FDI in the first of 2015. Mr Modi has been flaunting this figure though, strangely, the FDI figures put out by the government’s Department of Industrial Policy & Promotion and the RBI show that FDI in January-June this year is less than for the same period in 2014 and 2013.
Statistics are nothing to swear by, but the fact is that India is the only economy with huge growth potential and virgin markets to invest in, and Mr Modi now needs to get down to tackling the state governments on corruption as they, along with the local self-governing bodies, are the last mile that investors have to deal with. The importance of FDI cannot be stressed enough, considering that domestic investment is not forthcoming and the government’s expenditure on infrastructure is constrained by the need to keep its balance sheet intact.
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