Economics, Entitlements

India’s Foreign Direct Investment Heads South

In my column in today’s Wall Street Journal Asia, I argue that we may be seeing the first signs of foreign investors losing interest in India. Total foreign direct investment in the country declined by 32 percent last year to $24 billion. Over the same period, China’s already robust FDI inflows rose by 6 percent to cross $100 billion.

Needless to say, one grim statistic does not alter an otherwise positive story driven by world-class companies, an ambitious middle class, and a young population. Last month, car sales crossed 184,000, the best month ever in Asia’s third-largest automobile market; and $24 billion annually is still a lot more FDI than India was attracting as recently as five years ago.

Nonetheless, foreign investors voting against India compared to other Asian countries is a warning sign that New Delhi needs to take seriously. For more than four decades, until the advent of economic reforms in 1991, India was Asia’s economic laggard. It can hardly afford to slow down just when it has begun to catch up.

Comments are closed.