News / Economy

India Worried About Declining Foreign Investment

An Indian worker hammers on a steel cupboard at a metal wardrobe factory in Mumbai, India, Oct. 12, 2012.
An Indian worker hammers on a steel cupboard at a metal wardrobe factory in Mumbai, India, Oct. 12, 2012.
TEXT SIZE - +
Anjana Pasricha
— Two foreign companies have recently canceled plans to build massive steel plants in India.  Their pullout has led to fresh concerns about the country's ability to attract foreign investment and reinforces India's reputation as a tough place to do business.

Luxembourg-based ArcelorMittal, the world’s largest steelmaker, said huge delays in acquiring land due to local protests, and uncertainties over iron ore supplies compelled it to cancel its $8.5 billion steel plant project in Orissa state.

Posco, which shelved a proposed $ 5.3 billion steel plant in southern Karnataka state, cited similar hurdles.   
 
The two mega plants were planned when India’s booming economy was expected to devour steel for infrastructure projects and an expanding manufacturing industry. But as India’s economy slows down, demand for steel has cooled.
 
“Cars are not selling, infrastructure projects are not taking off, the government is not spending as much on projects,” complained Nishith Sharma of SteelGuru in New Delhi.
 
According to economists, the cancellation of the projects highlights a bigger problem: ensnared in red tape for years, investors are getting disenchanted with Asia’s third largest economy.
 
Like Posco and ArcelorMittal, the main hurdles investors face are huge delays in acquiring land, onerous environmental regulations, and access to reliable supplies of power and key minerals such as coal and iron ore. It can often take a company eight to ten years to secure approvals to start operations. Worse still, investors have to grapple with frequent policy changes.    
 
Economist Rajiv Kumar at the Center for Policy Research in New Delhi said India is losing its allure as a business destination. 
 
“A risk is something companies can factor in, but uncertainty where you have changing goal posts, or when you can't predict any outcome for anything, that is the major hassle that not just the foreign but the domestic investors as well face in India," Kumar said. "This is a fact today in 2012-2013, more capital was invested from India abroad than the other way around.”
 
Last year, foreign direct investment in India fell to about $26 billion - down by nearly one third compared to the previous year.   
 
The plummeting investment has prompted the government to announce more reforms to lure investors. The government decided in mid-July to ease ownership restrictions on several industries, including telecommunications.    
 
But economists say these steps alone are unlikely to attract foreign investors. They point out that although the government relaxed barriers to foreign investment in retail, insurance and aviation sectors last year, hardly any investment has come in.
 
Chief economist D.K. Joshi at CRISIL in Mumbai said investors are looking for stable policies, faster project approvals and a turnaround in the economy.  
 
“What matters for foreign investor is certainty of business environment," the economist explained. "What matters also is how fast you are growing, we have slipped a little bit on those fronts, so investment into India has become a little less attractive than it used to be.”
 
The country’s diminishing allure is not good news for India.  It desperately needs foreign investment both to shore up its finances as it grapples with a large deficit and to boost an economy growing at its slowest pace in a decade. But there is a silver lining. Although Posco and ArcelorMittal have walked away from two large projects, they say they will pursue other projects planned in the country.

You May Like

Analysts Warn of Regional Proxy Conflict in Afghanistan

Analysts warn if Kabul’s neighbors do not start to cooperate, competing desires for influence could deteriorate into a bloody proxy war in the country More

Saudi Intelligence Chief Resigns

Bandar bin Sultan came under criticism for supporting al Qaida, prompting King Abdallah to wrest Syria operations away from him in February, handing them to Interior Minister Prince Mohammed bin Nayef More

Poetry Magazine editor Don Share talks what makes a good poem with VOA's David Byrd

What makes a good poem? And is poetry as viable an art form as it once was? To find out, VOA's David Byrd spoke to Don Share, the editor of Poetry Magazine. More

This forum has been closed.
Comment Sorting
Comments
     
by: Yoshi from: Sapporo
July 24, 2013 5:32 AM
Where are BRICS countries going ? India and South africa are going to drop out from them first ? How about Brasil?, Russia?
China is the only one which is exceptionally keeping growth ?

I heard Japanese motor industry Suzuki has been doing well in India. Its president recently said that he will continue to produce cars in India employing local residents eventhough weakened Yen urges Suzuki costly to transfer factories from overseas back to Japan. I suppose there is some merit for Suzuki to keep running factories in India even taking accout of bribery and corruption et cetera.


by: Mehtasaab from: Washington, DC
July 23, 2013 1:33 PM
I agree with Davis. It is a dangerous zone to invest money in India.
Politicians are in competition to increase their foreign reserve in swiss bank accounts. There is a bill for anti corruption on the floor,
but politician want sign. They know that they will lose. If Modi's government win next election then he will do better. He is not corrupted and a business man. Modi put state of Gujarat on fast track. India needs leader like Modi.


by: Davis K. Thanjan from: New York
July 23, 2013 9:50 AM
Even thinking of doing any construction project is dangerous because of bureaucracy, nepotism, bribery, political protests, environmental regulations, problems of acquisition of land for projects, and barriers for foreign investment. Even if all the above hurdles are overcome, political parties are waiting for labor strikes to shut down any manufacturing company, especially if it is foreign owned manufacturing plant. Beware of foreign investment in any manufacturing projects in India.

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Google Buys Drone Companyi
|| 0:00:00
...
 
🔇
X
George Putic
April 15, 2014
In its latest purchase of high-tech companies, Google has acquired a manufacturer of solar-powered drones that can stay in the air almost indefinitely, relaying broadband Internet connection to remote areas. It is seen as yet another step in the U.S. based Web giant’s bid to bring Internet to the whole world. VOA’s George Putic reports.
Video

Video Google Buys Drone Company

In its latest purchase of high-tech companies, Google has acquired a manufacturer of solar-powered drones that can stay in the air almost indefinitely, relaying broadband Internet connection to remote areas. It is seen as yet another step in the U.S. based Web giant’s bid to bring Internet to the whole world. VOA’s George Putic reports.
Video

Video Ray Bonneville Sings the Blues and More on New CD

Singer/songwriter Ray Bonneville has released a new CD called “Easy Gone” with music that reflects his musical and personal journey from French-speaking Canada to his current home in Austin,Texas. The eclectic artist’s fan base extends from Texas to various parts of North America and Europe. VOA’s Greg Flakus reports from Austin.
Video

Video Millions Labor in Pakistan's Informal Economy

The World Bank says that in Pakistan, roughly 70 percent work in the so-called informal sector, a part of the economy that is unregulated and untaxed. VOA's Sharon Behn reports from Islamabad on how the informal sector impact's the Pakistani economy.
Video

Video Passover Celebrates Liberation from Bondage

Jewish people around the world are celebrating Passover, a commemoration of their liberation from slavery in Egypt more than 3,300 years ago. According to scripture, God helped the Jews, led by Moses, escape bondage in Egypt and cross the Red Sea into the desert. Zlatica Hoke reports that the story of the Jewish Exodus resonates with other people trying to escape slave-like conditions.
Video

Video Police Pursue Hate Crime Charges Against Kansas Shooting Suspect

Prosecutors are sifting through the evidence in the wake of Sunday’s shootings in a suburb of Kansas City, Missouri that left three people dead. A suspect in the shootings taken into custody is a white supremacist. As VOA’s Kane Farabaugh reports, he was well-known to law enforcement agencies and human rights groups alike.
Video

Video In Eastern Ukraine, Pro-unity Activists Emerge from Shadows

Amid the pro-Russian uprisings in eastern Ukraine, there is a large body of activists who support Ukrainian unity and reject Russian intervention. Their activities have remained largely underground, but they are preparing to take on their pro-Moscow opponents, as Henry Ridgwell reports from the eastern city of Donetsk.
Video

Video Basket Maker’s Skills Have World Reach

A prestigious craft show in the U.S. capital offers one-of-a-kind creations by more than 120 artists working in a variety of media. As VOA’s Julie Taboh reports from Washington, one artist lucky enough to be selected says sharing her skills with women overseas is just as significant.
Video

Video UN Report Urges Speedier Action to Avoid Climate Disaster

A new United Nations report says the world must switch from fossil fuels to cleaner energy sources to control the effects of climate change. The Intergovernmental Panel on Climate Change released the report (Sunday) following a meeting of scientists and government representatives in Berlin. The comprehensive review follows two recent IPCC reports that detail the certainty of climate change, its impacts and in this most recent report what to do about it. VOA’s Rosanne Skirble has the details.
AppleAndroid

World Currencies

EUR
USD
0.7287
JPY
USD
103.22
GBP
USD
0.6027
CAD
USD
1.0991
INR
USD
60.191

Rates may not be current.