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.
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

Photogallery Ukraine: Russian Forces Tightening Grip on East

And new United Nations report documents human rights abuses committed by both sides in conflict More

Locust Swarms Fill Antananarivo Skies

FAO-led control efforts halted plague More

South Africa’s Plan to Move Rhinos May Not Stop Poaching

Experts say international coordination needed to follow the money trail and bring down rhino horn kingpins 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.
Is West Doing Enough to Tackle Islamic State?i
X
Henry Ridgwell
August 29, 2014 12:26 AM
U.S. President Barack Obama has ruled out sending ground troops to Iraq to fight militants of the so-called Islamic State, or ISIS, despite officials in Washington describing the extremist group as the biggest threat the United States has faced in years. Henry Ridgwell reports from London on the growing uncertainty over whether the West’s response to ISIS will be enough to defeat the terrorist threat.
Video

Video Is West Doing Enough to Tackle Islamic State?

U.S. President Barack Obama has ruled out sending ground troops to Iraq to fight militants of the so-called Islamic State, or ISIS, despite officials in Washington describing the extremist group as the biggest threat the United States has faced in years. Henry Ridgwell reports from London on the growing uncertainty over whether the West’s response to ISIS will be enough to defeat the terrorist threat.
Video

Video Pachyderms Play Polo to Raise Money for Elephants

Polo, the ancient team competition typically played on horseback, is known as the “sport of kings.” However, the royal version for one annual event in Thailand swaps the horse for the kingdom’s national symbol - the elephant. VOA Correspondent Steve Herman in Samut Prakan reports that the King’s Cup Elephant Polo tournament is all for a good cause.
Video

Video Coalition to Fight Islamic State Could Reward Assad

The United States along with European and Mideast allies are considering a broader assault against Islamic State fighters who have spread from Syria into Iraq and risk further destabilizing an already troubled region. But as VOA State Department Correspondent Scott Stearns reports, confronting those militants could end up helping the embattled Syrian President Bashar al-Assad.
Video

Video Made in America Socks Get Toehold in Online Fashion Market

Three young entrepreneurs are hoping to revolutionize the high-end sock industry by introducing all-American creations of their own. And they’re doing most of it the old-fashioned way. VOA’s Julie Taboh recently caught up with them to learn what goes into making their one-of-a-kind socks.
Video

Video Americans, Ex-Pats Send Relief Supplies to West Africa

Health organizations from around the world are sending supplies and specialists to the West African countries that are dealing with the worst Ebola outbreak in history. On a smaller scale, ordinary Americans and African expatriates living in the United States are doing the same. VOA's Carol Pearson reports.
Video

Video America's Most Popular Artworks Displayed in Public Places

Public places in cities across America were turned into open-air art galleries in August. Pictures of the nation’s most popular artworks were displayed on billboards, bus shelters, subway platforms and more. The idea behind “Art Everywhere,” a collaborative campaign by five major museums is to allow more people to enjoy art and learn about the country’s culture and history. Faiza Elmasry has more.
Video

Video Chinese Doctors Use 3-D Spinal Implant

A Chinese boy suffering from a debilitating bone disease has become the first patient with a part of his spine created in a three-dimensional printer. Doctors say he will soon regain normal mobility. VOA’s George Putic reports.
Video

Video Uneasy Calm Settles Over Israel, Gaza Strip

Israel and the Gaza Strip have been calm since a cease-fire set in Tuesday evening, ending seven weeks of hostilities. Hamas, which controls Gaza, declared victory. Israelis were more wart. VOA’s Scott Bobb reports from Jerusalem.
Video

Video India’s Leprosy Battle Stymied by Continuing Stigma

Medical advancements in the treatment of leprosy have greatly diminished its impact around the world, largely eliminating the disease from most countries. India made great strides in combating leprosy, but still accounts for a majority of the world’s new cases each year, and the number of newly infected Indians is rising - more than 130,000 recorded last year. Doctors there say the problem has more to do with society than science. Shaikh Azizur Rahman reports from Kolkata.
Video

Video Scientists Unlock Mystery of Bird Flocks

How can flocks of birds, schools of fish or herds of antelope suddenly change direction -- all the individuals adjusting their movement in concert, at seemingly the same time? British researchers now have some insights into this behavior, which has puzzled scientists for a long time. VOA's George Putic has more.

AppleAndroid

World Currencies

EUR
USD
0.7537
JPY
USD
103.79
GBP
USD
0.6032
CAD
USD
1.0957
INR
USD
60.522

Rates may not be current.