Foreign Direct Investment in India: More words than action

The Indian stock market is in a celebration mood. Foreign Institutional Investors (FII’s) are pouring in money and buying stocks in large amounts. They are counting on Mody’s victory. More money will pour in after May 12, when the elections are over and the exit poll data confirm the investor’s expectation. If by any chance their predictions turn out to be wrong, a mass exodus is possible. This will push the Sensex several percentage lower and the rupee’s value will be affected. We should bear in mind this is all speculation and reality could be different.

In the case of FDI (Foreign Direct Investment) things are very different. India’s reputation as an investment destination stands at precarious juncture. Global companies currently operating here or considering coming the mood is more glum. Bruises left after several years of weakening growth, continually changing regulation and extremely weak leadership are proving slow to heal. Let us look at some facts. Japanese mobile operator NTT DOCOMO packed up its lack luster telecoms partnership with the TATA conglomerate taking a haircut of $ 1.3 billion in the process. Drug maker Daiichi Sankyo fled from its own Indian joint venture last month. The tax issues relating to Vodafone of Britain and Nokia of Finland are well known. Balfour Beatty of Britain is the largest construction company by sales. Last year it was full of enthusiasm and had planned to commit quite a chunk of money in the Indian infrastructure development but decided to drop out.

The entire FDI sector is looking forward to Modi’s leadership. All said and done the recent record India as an investment destination has been poor. We need action, not words.

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