A senior analyst at a top American think tank has lauded Prime Minister Narendra Modi’s pace of economic reforms, saying his government has made 37 sector reforms in just over three years. The Modi government’s openness to foreign investment, in addition to domestic reforms and other external factors, has resulted in a foreign investment boom in India, Richard M Rossow, senior adviser and Wadhwani Chair in US-India Policy Studies at the Center for Strategic and International Studies, a top American think-tank, said.
“Looking at its entire tenure in office, the Modi government is liberalising India’s FDI regime faster than any of its recent predecessors,” Rossow wrote in a policy paper. According to Rossow, this point is particularly notable since, after 25 years of adopting pro-market policies, India’s foreign investment regime is already much more open than it was in the early 1990s.
The Atal Vajpayee government made 29 changes to India’s foreign investment regime during its six years in office. During Manmohan Singh’s first term his government made 19 changes and 18 in its second term.
“The Modi government has made 37 sector reforms in just over three years— a historic pace,” Rossow said. During the first year of the Modi government, India attracted USD 33.8 billion in fresh foreign equity investments. This jumped to USD 40.7 billion in year two and USD 44.5 billion in year three, he said.
However, foreign portfolio investment (FPI) has been choppier. India attracted USD 28 billion in FPI during Modi’s first 12 months in office. In year two, FPI saw net outflows to the tune of USD 2.7 billion. In year three, FPI rebounded somewhat to USD 9.2 billion.
And early in year four, the pace has quickened again, with around USD 12.5 billion in inflows in May–July 2017, the article said. But according to Rossow, Modi’s reform process has been uneven. “Of the Modi government’s 37 reforms, 6 came in his first year in office, 22 in his second year, and 9 in his third year,” he said.
“Some of these were quite modest, such as incremental changes to the rules governing foreign investment in defence and single brand retail. Others are more significant, such as opening the railways sector to 100 per cent foreign investment and relaxing onerous rules around foreign investment in construction projects,” he noted.