Has India's Economic Growth Dividend Faded Amid Massive Foreign Capital Outflows and Currency Depreciation?
Yesterday, a researcher from a U.S. think tank published an article in The Wall Street Journal analyzing India’s economy, bluntly stating that India is gradually losing the momentum of its past economic growth dividends. Over more than a decade under Modi’s leadership, previously planned goals for economic modernization have fallen short of expectations. Today, the rupee’s continuous depreciation and massive outflows of foreign capital have become glaring problems. In the past year alone, the Indian rupee has depreciated 11% against the U.S. dollar; this year, foreign capital withdrawals from Indian stock markets have exceeded $23 billion; last fiscal year, foreign direct investment (FDI) in India reached only $7.7 billion—a stark contrast to the $28 billion recorded three years ago. Tesla has shelved its plan to build a factory in India; the IMF forecasts that per capita GDP in India will be overtaken by Bangladesh this year, while India’s market capitalization has been repeatedly surpassed by South Korea. Rising import costs due to geopolitical conflicts are an external trigger, but industry insiders widely agree that complex entry regulations and volatile tax policies continue to undermine investor confidence—these are the core internal causes behind the economic slowdown!
Looking back at India’s development history, the landmark market-oriented reforms launched in 1991 drastically liberalized trade: tariffs were reduced and factory establishment approvals were relaxed. Within just three years, foreign exchange reserves surged from $1.2 billion to $15 billion, and GDP growth broke free from stagnation, exceeding 5%. This openness allowed India to ride a wave of economic expansion. Today, as global industrial chains undergo widespread restructuring and the U.S. dollar remains elevated and volatile, capital increasingly favors emerging markets with stable policies and streamlined approval processes. Neighboring Vietnam continues to optimize its business environment—streamlining investment approvals and implementing long-term tax incentives—leading to steadily rising foreign investment inflows, creating a sharp contrast with India. India’s overreliance on remittances from Gulf expatriates and crude oil trade to sustain its economy has exposed a critical vulnerability: with 85% of its crude oil imports dependent on external sources, this weakness has been magnified amid ongoing geopolitical turbulence. Yet the root cause lies in policy inconsistency. Constantly raising capital gains taxes and introducing hundreds of new entry controls creates administrative barriers that restrict market competition. Even with a vast domestic consumer base, India struggles to retain foreign capital. To reverse this downward trend, abandoning outdated development models and aligning with neighboring countries by refining business regulations is the only pragmatic path forward.
Original Source: toutiao.com/article/1867112643699724/
Disclaimer: The views expressed in this article are those of the author(s) personally.