Read the warning – The Times of India
India remains world’s fastest growing major economy, but there are warning lights on the dashboard. For the second time in four months, global fund managers have voted us the least preferred investment destination in Asia-Pacific. We were in the same spot in Aug 2025 also. Meanwhile, at home, corporate reluctance to invest continues for various reasons. Point is, while we keep celebrating 6.5%-7.5% GDP growth, the 9% bus passes us by. And we can’t attain developed nation status without boarding it.Why aren’t FPIs keen on India? For starters, we are nowhere in the AI game. We don’t make chips, and we don’t have a leading AI model. It’s like the late-18th century, when steam power was ushering in the industrial age, but not in India. Markets in smaller countries like Taiwan and S Korea have gained enormously from AI. Taiwan briefly overtook India to become 5th most valuable stock market. Foreign funds also have doubts about India’s economic reforms, and valuations of stocks. They don’t see much earnings potential just yet, and have been pulling out for months.We can be dismissive about FPIs, of course. They don’t invest on the ground, and are here only to make a quick buck, so why should we care? Well, when they pull out dollars, rupee weakens, and our sizeable import bill becomes that much larger. From petrol to phones, stuff gets costlier in rupees. And a weakening rupee further dents foreign investors’ returns from Indian stocks, dampening their interest. Subdued returns hurt Indian small investors also, who miss the wealth effect and become tight-fisted.Which brings us to the capex problem. Indian corporates have had many good quarters, but if they’re still hesitant to invest, it’s because they’re unsure about growth prospects. Amid geopolitical tensions, fluctuating commodity prices, and rising trade barriers, they can’t count on foreign markets either. The two problems, of uninterested FPIs and reluctant corporates, are really a reminder that Indian economy’s periodic service is overdue. While govt can’t bring about an AI revolution, it can create enabling conditions, and roll out much-needed reforms. It’s time to heed those warning lights.
Disclaimer: Views expressed above are the author’s own.
