INSUBCONTINENT EXCLUSIVE:
its first full-year decline since Prime Minister Narendra Modi came to power in 2014
The reversal from strong numbers in PM Modi's initial years in charge may indicate that investors are being deterred by the government's
recent protectionist policies and uncertainty about this year's general election result.Inbound foreign direct investment (FDI) dropped 7
per cent to $33.5 billion in the nine months between April and December 2018, compared with $36 billion in the year-earlier period,
according to figures released over the weekend.Industry experts and some government officials said the investment inflows may remain
sluggish for the next few months as investors wait to see who forms the next government after the election, which must be held by early
May.If PM Modi's Bharatiya Janata Party loses power then there could be a coalition government involving the opposition Congress party and
regional parties.There is also concern among some foreign businesses about the PM Modi government's increasingly protectionist tilt
That was illustrated by moves at the beginning of this month to tighten rules on the ways that big foreign-controlled online retailers
Amazon and Flipkart, which is controlled by giant US retailer Walmart, are allowed to operate.Walmart last year invested $16 billion in
buying 77 per cent of Flipkart
It is unclear how much of that deal is reflected in the latest FDI data
The FDI figures, which haven't been produced for about six months and have elicited little attention as they were released without fanfare
over the weekend, exclude reinvestment of profits by foreign companies already in India as well as new investment through the capital
markets.Top FDI sources led by SingaporeThe top sources for the FDI were Singapore, with $13 billion, Mauritius $6 billion, Japan $2.2
billion and Britain with $1.1 billion
Mauritius is often used by Indians living overseas and Indian companies to route money into or out of the country.The growth of FDI inflows
has been dropping dramatically since recording a 35 per cent rise in the fiscal year to March 31, 2016, after PM Modi came to power
That sharp growth was helped by policies introduced in his first two years in power that promoted foreign investment, as well as by the
certainty of having a government with a clear majority in parliament.Initially, investors were attracted by the launch of a new nationwide
Goods and Services Tax in 2017, a promise to bring down the corporate tax to 25 per cent, and incentives to set up factories for domestic
and export markets.India has moved up 53 places in the World Bank's Ease of Doing Business survey to 77 in the last two years, and PM Modi
is aiming for a top 50 spot by next year.But there is a growing feeling, business leaders said, that while countries such as Vietnam are
offering tax holidays to investors, India has shifted towards protectionism under political pressure."Lack of policy certainty along with
upcoming elections are two reasons that the reduction in foreign direct investments can be attributed to," said Sachin Taparia, founder of
Local Circles, a network of about 30,000 businesses.By last fiscal year, ending March 31, 2018, FDI growth had slowed to just 3 per
cent."Temporary dip"A senior commerce and industry ministry official, who deals with foreign investors, said the fall in investment inflows
was temporary and the government expects them to pick up again
"India has opened up almost all sectors for foreign investors," he said, adding that the government was investing to build infrastructure,
particularly roads, ports, railways and power plants, to entice investors."Unlike some other countries, we have no plans to offer tax
holidays to attract investors," said the official, who declined to be named as he was not authorised to speak to media.Another government
official said India had no plans to give any special treatment to foreign investors, and recent curbs on dubious inflows of funds from tax
havens were one of the reasons behind fall in capital inflows.Some investors, however, said they remain bullish on the world's sixth
Blackstone COO Jonathan Gray, who heads the world's largest private equity funds by assets raised, said that India was becoming more
attractive to foreign investors under PM Modi's rule."This country has lacked infrastructure, not just physical but legal, regulatory,
monetary," he said at a conference late last week
Fortunately, that's changing.""There is obviously much more to do: more infrastructure is certainly needed (and) more cohesive and faster
The good news is that this government gets it."
