#949 India’s Foreign Investment Problem Is Bigger Than You Think | Govindraj Ethiraj | The Core Report
Summary
Ajay Banga discusses six structural barriers deterring foreign capital from India, including complex capital controls, punitive taxation, and weak contract enforcement. He argues that India’s institutional unpredictability and "fog of law" create excessive risk for investors, stalling FDI flows since 2011. Banga emphasizes that attracting global investment is crucial for India’s economic growth and knowledge transfer, urging policymakers to prioritize prosperity over pride by adopting residence-based taxation and honoring bilateral investment treaties.
Topics discussed
Introduction: The fear factor and India's global image
FDI and FPI flows stalled since 2011
Legal uncertainty and criminalization of FEMA
Taxation issues and the case for residence-based tax
Expropriation risks and exit from investment treaties
Trade barriers and the impact of US-China tensions
Market infrastructure failures and capital controls
Rule of law, contract enforcement, and tax administration
Need for deep knowledge communities to solve structural issues
Domestic capital stagnation and rise of economic nationalism
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