Dwindling foreign direct investment (FDI) flows into India are by now a staple of the country’s souring as an investment destination.
Not only are foreigners shying away from India, but Indians, too, are going abroad in droves. Data released by the Reserve Bank of India shows that in 2010-11, outward direct investment was nearly $44 billion while FDI inflows were only $25.8 billion, down by 25% over the previous year. Outward flows, in contrast, had gone up from $17.9 to $44 billion. This fiscal, too, the FDI trend is disappointing.
There are, no doubt, many factors in these trends but one cause stands out loud and clear: the policymaking logjam in India and the downright hostile environment for many big investors in the country. The case of Posco steel in Orissa is just one example. The Union government needs to wake up to this situation before it gets out of hand.