Foreign investors are reluctant due to the uncertainty of the impending elections result.
This should be a significant concern for Prime Minister Narendra Modi as he endeavors a second term in office in polls due by May.
Unlike Southeast Asia, India doesn't perceive any investment additions as global trade tightness obstruct supply chains.
Foreign direct investment in the 3rd-largest Asian economy fell 7 percent in the 9months to December, indicating slowing investment before forthcoming elections. FDI inflows into India throughout the period was $33.5 billion, lower than the $35.9 billion in the year-ago period. The decline was more noticeable in the manufacturing sectors.
That should be a concern for Prime Minister Narendra Modi as he seeks a 2nd term in office in polls due by May. He had cleared to power in 2014 with the most notable victory margin in 30 years after vowing to make India a center for manufacturing and generate jobs for 10 million people every year.
Global headwinds and political change generated by the forthcoming elections are seen as causes why investors have chosen to wait on the sidelines.
India is now in an unpredictable state politically,” said Indira Rajaraman, an economist and a previous member of the Reserve Bank of India’s board. “The climate here won’t encourage companies to make long-term investments for the time being.”
The slump in foreign direct investment in India is in contradiction to the growth seen in its Southeast Asian companions. Thailand, Philippines, Vietnam, and Malaysia are seen poised to profit from the trade stress between the U.S. and China, as companies explore to re-work supply chains intimidated by tariffs.
“The Philippines and other Southeast Asian countries have been steadily setting themselves up, inviting foreign investment,” said Rajaraman. “An open door policy makes them more attractive at this juncture.”