Whalesbook
Restrictive FDI Rules Harm Investment Climate
Economist Surjit Bhalla has strongly criticized India's investment environment, calling it "very bad" and a major reason for foreign and domestic capital to shy away. He specifically cited the 2017 Foreign Direct Investment (FDI) policy, which requires investment disputes to be settled within India instead of through international arbitration. Bhalla noted this is unusual globally and suggested India's legal system is not yet at a developed standard. He estimates this policy, along with the suspension of Bilateral Investment Treaties (BITs) since 2017, has contributed to about 30% of the drop in FDI.
Slowing Growth Risks Poverty Gains
Bhalla expressed concern that India's progress in reducing extreme poverty is threatened by slowing economic growth. He believes that recent electoral victories might have led the government to become complacent, delaying crucial reforms. "If growth continues this way, then poverty will also become our problem," Bhalla stated, emphasizing the need for sustained growth.
Global Pressures Add to Domestic Woes
Bhalla's assessment comes as the global economy faces challenges, including disruptions from Middle East conflicts affecting oil supplies. Prime Minister Narendra Modi has also cautioned about potential global disasters that could reverse poverty reduction efforts. Despite these global issues, Bhalla believes India's position on extreme poverty remains relatively stable, partly due to food subsidies. He even suggested that some of these subsidies could be reduced, arguing that the extensive system of