“Corporate Motion Of No Confidence”: Jairam Ramesh On Fall In FDI
Congress leader Jairam Ramesh has criticised the Modi government over a sharp decline in foreign direct investment (FDI) inflows, calling it a “corporate motion of no confidence.” Sharing data from the Reserve Bank of India (RBI) and a report by The Print, Ramesh highlighted what he described as a deteriorating investment climate under the current regime.
“The investment environment in India has been sluggish in the Modi decade,” stated Ramesh, Congress’s General Secretary in charge of Communications. He noted that Gross Fixed Capital Formation has consistently fallen below 29% of GDP over the past ten years, compared to an average of 32% during Dr Manmohan Singh’s tenure as Prime Minister.
Decline in FDI
Ramesh pointed to fresh evidence underscoring the private sector’s reluctance to invest under the current government. Data for April to October 2024 reveals that net FDI inflows dropped to $14.5 billion, a 12-year low. This marks a sharp decline from $34 billion during the same period in 2020-21 and reflects a consistent downward trend since the pandemic.
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Gross FDI inflows, although stable at $48.6 billion, have been offset by a surge in outflows. Foreign companies repatriated $34.1 billion during this period, a significant rise from $26.4 billion in the previous year. The gap between inflows and outflows has contributed to the lowest net FDI figures since 2012-13.
Ramesh highlighted another troubling trend: Indian companies are increasingly investing abroad rather than at home. Economists attribute this to the relative attractiveness of the US economy amid global uncertainty, alongside India’s slowing GDP growth and declining corporate profitability.
Sluggish Domestic Investment
Ramesh criticised the government for failing to stimulate domestic investment, which he argued is the backbone of economic growth. “Mass consumption is not accelerating, tax and other authorities are intimidating businesses, and there is a growing perception that only a few business groups can thrive under this regime,” he said.
He called for the upcoming Union Budget to prioritise domestic investment. “FDI is important, but more fundamental is DI—Domestic Investment. Stimulating and sustaining DI must be the central concern,” he added.
Economic Analysis
The decline in net FDI flows reflects broader challenges in the Indian economy. D.K. Srivastava, Chief Policy Adviser at EY India, told The Print, “Slowing GDP growth and poor corporate profitability are contributing factors, although these are more short-term considerations.”
The trend of increasing repatriation and disinvestment by foreign companies has persisted since 2017-18. This raises concerns about the long-term viability of India’s investment climate under the current administration.
Political Implications
The Congress leader’s remarks come at a critical juncture as the Modi government faces scrutiny over its economic policies. By emphasising the decline in both foreign and domestic investments, Ramesh has sought to question the government’s narrative of economic growth and development.
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With the Union Budget just weeks away, the focus is likely to intensify on measures to revive investment and address the challenges facing the private sector.
