India, once hailed as one of the fastest-growing major economies in the world, has recently faced significant economic hurdles under the leadership of Prime Minister Narendra Modi. Despite ambitious reforms and a vision to transform India into a global economic powerhouse, several of Modi’s economic policies have come under scrutiny for their unintended consequences, particularly in the realms of foreign investment and overall economic stability.
Modi’s Economic Vision and Its Ambitions
When Narendra Modi took office in 2014, his government launched a series of initiatives aimed at boosting India’s economy, attracting foreign investment, and fostering domestic manufacturing. Programs such as “Make in India” were designed to encourage global companies to establish manufacturing units within India, thereby generating jobs and reducing dependency on imports. Additionally, reforms in taxation like the introduction of the Goods and Services Tax (GST) aimed to simplify the tax system and create a more unified market.
However, while the rhetoric was ambitious and the intentions appeared progressive, the outcomes have been mixed. Economic growth slowed down significantly in recent years, and key economic indicators reflect a deeper malaise beneath the surface optimism.
The Growing Economic Strain on the Common People
One of the most pressing concerns highlighted by recent reports is the growing financial stress among India’s vast population. According to international venture capital firm Bloom Ventures, about one billion out of India’s 1.4 billion people struggle with day-to-day expenses, barely managing to meet even basic necessities. The report underscores that 90% of the population has just enough purchasing power to cover fundamental needs, leaving little room for discretionary spending or investment in higher-quality goods and services.
This widespread economic hardship among the middle and lower classes significantly dampens domestic demand, creating a cyclical effect that impairs overall economic growth. When consumers cannot spend freely, businesses suffer, leading to lower profits, reduced hiring, and less confidence in the market.
Decline in Foreign Investment and Market Confidence
Perhaps the most alarming impact of the Modi government’s economic policies has been the sharp decline in foreign investment. India has historically been a magnet for foreign direct investment (FDI) and portfolio investments, with international investors eager to tap into its vast market potential. However, recent statistics tell a worrying story.
Foreign investment in the Mumbai Stock Exchange has reportedly fallen by 18%, reaching some of the lowest levels seen in years. In May 2024 alone, foreign investors offloaded shares worth approximately $4.2 billion, following another $1 billion in sell-offs in April. This withdrawal signals eroding confidence among foreign investors, likely triggered by regulatory uncertainties, fluctuating currency values, and broader economic instability.
The volatility of the Indian Rupee against the US Dollar further exacerbates investor concerns. Currency fluctuations introduce additional risks, making it less attractive for foreign capital to flow into Indian markets, which require stable conditions for growth.
The Failure of ‘Make in India’
The “Make in India” initiative was heralded as a game-changer, aiming to make India a global manufacturing hub and reduce reliance on imports. However, the project has largely failed to deliver on its promises. Complex bureaucratic hurdles, inconsistent regulatory frameworks, and delays in infrastructure projects have discouraged many foreign companies from investing in India.
For instance, the POSCO steel mill project faced delays spanning nearly a decade due to land acquisition issues and regulatory red tape. Similarly, the Mumbai-Ahmedabad bullet train project, a flagship infrastructure venture, has been plagued by prolonged delays, raising questions about the government’s ability to implement large-scale industrial projects efficiently.
These setbacks highlight the challenges foreign investors face when trying to navigate India’s regulatory environment, undermining the very purpose of initiatives designed to attract and facilitate investment.
Broader Economic Implications
The consequences of these economic challenges extend beyond foreign investment and market performance. A sustained decline in foreign investment can stall technological advancements, reduce capital inflows, and limit job creation, especially in high-value manufacturing and services sectors. Moreover, economic stagnation can exacerbate income inequality and social unrest, further complicating India’s development trajectory.
On the other hand, the government’s heavy emphasis on flagship projects and political priorities often sidelines smaller but critical sectors that form the backbone of India’s economy, such as agriculture and small-scale manufacturing.
Conclusion: The Need for Reassessment
India stands at a crossroads where it must reconsider the effectiveness of its economic policies under Modi’s administration. While ambitious plans and visionary projects are essential for a country of India’s scale and aspirations, implementation challenges and policy inconsistencies have undermined investor confidence and economic stability.
Reviving foreign investment requires transparent, predictable regulations, infrastructure improvements, and stronger protections for investors. Additionally, addressing the financial hardships faced by the majority of Indians is crucial to stimulating domestic demand and ensuring inclusive growth.
Without these adjustments, India risks falling behind other emerging economies that are more adept at creating favorable conditions for investment and economic expansion. The Modi government’s legacy on the economic front will largely depend on its ability to adapt and course-correct before the current challenges deepen further.
Reference: مودی کی ناکام معاشی پالیسیاں، بھارت میں غیرملکی سرمایہ کاری میں کمی
