Why is the Indian economy declining after a wonderful performance in 2022? In current year, 2023, India has witnessed a significant decline in Foreign Direct Investment (FDI), attributed to a combination of global uncertainties and internal factors. However, many analysts believe that the prolonged rule of the Modi-led BJP government is associated with economic cartels, fostering corruption. This has contributed to the decrease in FDI in the country. It is imperative to shed light on these issues before the 2024 General Elections to dispel misconceptions about the economic friendliness of the BJP government. It will help Indian citizenry to make an informed choice through the ballot.
Decline in FDI
The fiscal year 2022 marked a record-high FDI of $83.5 billion. However, by the fiscal year 2023, FDI inflows contracted to $70.9 billion, indicating a decline of $12.6 billion. Global uncertainties, including the Ukraine war, Gaza conflict, and India’s protectionist policies, coupled with the internal environment, are identified as key contributors to this decline.
Top Investor Countries – 2023
Singapore leads in FDI with $17.2 billion, followed by Mauritius ($6.1 billion), the US ($6 billion), UAE ($3.3 billion), Netherlands ($2.5 billion), and Japan ($2 billion). Notably, the UK, Cyprus, and Germany have also made considerable investments in the IT, telecom, and pharma sectors.
Leading States Receiving FDI – 2023
Maharashtra tops the list of FDI recipients with $14.8 billion out of the total $70.9 billion, followed by Karnataka ($10.4 billion), Delhi ($7.5 billion), and Gujarat ($4.7 billion).
Economic Indicators Overview – 2023
In 2023, India faced a series of economic challenges, as reflected in key indicators. Foreign Direct Investment (FDI) witnessed a decline from $83.5 billion in 2022 to $70.9 billion in 2023, representing a decrease of $12.6 billion. The trade deficit increased from $198 billion to $204 billion, signaling a rise of $6 billion. Foreign debt showed an upward trend, escalating from $612 billion to $624 billion, marking an increase of $12 billion. Forex reserves experienced a significant decline, plummeting from $648 billion to $602 billion, reflecting a decrease of $46 billion. Inflation rose from 6.2% to 7.44%, indicating an increase of 1.76%. Unemployment also saw a surge from 7.2% to 8.2%, reflecting a 1% increase. These economic indicators collectively paint a challenging picture for India in 2023, necessitating a comprehensive and strategic approach to address the underlying issues and foster sustainable economic growth.
Indian Domestic Environment
Corruption, seen as a hindrance, adds costs and uncertainties, discouraging investment and distorting competition. The “corruption as sand” theory applies to the Modi-led BJP regime, with each passing year witnessing a decline in FDI, signaling an underlying economic crisis.
Singapore and Mauritius in Indian Inward FDIs
Singapore and Mauritius play a significant role in Indian inward FDIs, serving as safe havens for tax evasion and the re-routing of black money as FDI. Corporate tycoons, including Adani, Ambani, and TATA, utilize these jurisdictions, with Modi as a prime beneficiary.
Bribery and Corruption in India
India faces the highest bribery rate in Asia, as revealed by the Global Corruption Barometer by Transparency International in 2021. This challenges the ruling dispensation’s claims of a ‘corruption-free India’ and underscores the need for addressing corruption at all levels.
Governance Challenges
The BJP-led government’s track record in governance has been dismal, with the absence of transparent appointments to the Central Information Commission since May 2014. This lack of transparency has led citizens to approach courts for clarity on governance issues.
FDI Policy Revisions and Economic Setbacks
Due to the contraction in FDI, India has revised its investment policy, permitting 100% FDI in railway, education, and construction sectors. However, this has also led to a discouragement of domestic investors. The withdrawal of $19.5 billion by the business giant “Taiwan Foxconn” due to red-tapism governance and the unavailability of skilled labor reflects the challenges faced by the Indian government.
Conclusion
Negative economic indicators in 2023, coupled with the BJP regime’s lack of efforts, suggest a continuing economic downturn. India’s high-handed actions in suppressing dissidents abroad may adversely impact its economy, with Western countries expressing intent to withdraw investments due to violations of democratic values. It is crucial for the Indian government to address these concerns and work towards creating a transparent, investor-friendly environment for sustained economic growth.
The author: Atta Rasool Malik hails from semi-tribal areas of Pakistan. He is a veteran and holds an M.Phil. degree in international relations from National Defence University Islamabad. His interests include the politics of South Asia, the Middle East, and Islamic and Jewish theology.