Despite recent growth surges, India’s top officials and global investors warn of the need for structural reforms to sustain momentum and improve investment climate amid cautious optimism.
India’s latest burst of growth has drawn praise from investors and officials alike, but the louder message from some of the country’s most influential voices is one of caution rather than triumph. At a banking and economic conclave in Mumbai last week, P K Mishra, principal secretary to the prime minister, argued that India still needs to sharpen its manufacturing competitiveness, cut import dependence and equip its young workforce with better skills if it wants to sustain momentum. He also struck a blunt note on foreign direct investment, saying the country needs policy stability, reliable contracts, better logistics and faster clearances.
That warning was echoed by V Anantha Nageswaran, the chief economic adviser, who described the Reserve Bank of India’s concessional foreign-exchange swap facility as a useful source of breathing room rather than a permanent fix. The swap window has brought in about $143.6 billion so far, most of it through foreign currency non-resident bank deposits, according to figures compiled by market trackers and reports on the RBI’s programme. Nageswaran said India must compete harder for global capital and strengthen state-level policy, investor protection and contractual certainty, while also treating the country’s demographic dividend as something that must be actively earned, not assumed.
The RBI’s facility was launched in June to encourage foreign currency inflows and support reserves, with banks allowed to attract deposits and borrowings under favourable swap terms. The central bank later closed the FCNR(B) deposit window early after an unexpectedly strong response, while other channels remain open through the end of the year. State-owned banks had already been looking to tap nearly $30 billion through the scheme, underscoring how quickly the measure became a significant pressure valve for the external account.
Outside government, the tone was no less guarded. Jamie Dimon, chairman and chief executive of JPMorgan Chase, told The Economic Times that foreign companies can struggle to compete in India when regulations are used to block rivals and when tax and rule enforcement is inconsistent. He said such barriers are harmful for Indian consumers as well as for competition. While he said many investors retain a positive long-term view of India and acknowledged its strong recent growth, his comments reflected a wider concern among global executives that the country’s investment climate still depends too much on execution, not just ambition.
That concern was sharpened by a recent note from Bernstein, which argued that foreign portfolio investors are unlikely to return in force unless India addresses deeper structural issues in its corporate sector. The brokerage said large listed companies often resemble a previous phase of the economy, while many smaller firms remain hard to invest in at institutional scale. Its authors also suggested that some large groups continue to rely on policy protection rather than renewed investment. Against that backdrop, Vala Afshar, chief digital evangelist at Salesforce, offered a more optimistic view of India’s prospects in artificial intelligence, saying the country has the talent, demographics, data and innovation to join the global AI elite if it can keep engineers and founders at home.
Disclaimer: This article is intended to inform and educate, not to recommend or endorse any financial product, investment or strategy. Please consider your own financial circumstances and seek professional advice where appropriate before making financial decisions.
