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March 2011

FDI’s free fall

By Raman Jokhakar
Tarunkumar G. Singhal
Chartered Accountants
Reading Time 2 mins
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The existentialist dilemma before Indian democracy is stark :
it cannot co-exist with financial honesty. It does not matter if you are
personally incorruptible; you have to be institutionally corrupt in order to
engage in the business of democracy. The moral code of elections is
uncomplicated : Don’t ask. Don’t tell. And for God’s sake don’t get caught.


— M. J. Akbar
in India Today, dated 10-1-2011

59 FDI’s free fall

Falling FDI in both absolute and relative terms indicates a
lack of investor confidence. It should jolt politicians back to governance and
building on the 1991 reforms. A UN report on FDI in 2010 makes this point
sharply. Though global FDI flows increased by a percentage point over the last
year, developing economies’ share jumped 10%. For the first time ever, more than
half of global FDI travelled to emerging markets. However, FDI inflows into
India declined by a whopping 31.5%. And that’s not in relative but in absolute
terms. In other words, it’s not just that India is getting a smaller share of a
bigger pie — indicating its relative uncompetitiveness among emerging markets.
It’s that the size of the pie itself has shrunk for India – by almost a third.
That ought to be enough to set alarm bells clanging for our economic managers.

(Source : The Times of India, dated 25-1-2011)

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