The government has also made it easier for foreign investors to access India’s stock market, through projects like GIFT City — a new financial center being built in Modi’s home state of Gujarat.
“I’m not saying everything is because of this government, but this government has done much more than others,” said Prasanna Tanti, a professor of finance at the Indian School of Business. “India has become a paradise for all kinds of investors,” he added.
But the year-on-year growth in investment has recently slowed to a trickle, falling from nearly 30% during Modi’s first two years in power to less than 5% between 2017 and 2018.
Some investors have become more wary as the election approaches.
“The slowdown in growth … is, in part, due to election related uncertainty with investors awaiting clarity on the next government’s reform mandate,” Priyanka Kishore, India head at Oxford Economics, told CNN Business.
But Modi’s overall track record has been one of openness to foreign players, and that is expected to continue if he wins a second term in office.
“Some bit of protectionism is needed, and some bit of protectionism is desired for an economy,” said Anuradha Saha, a professor of economics at Ashoka University. Global players like Amazon are used to operating in a variety of regulatory environments and can live with the curbs.
“I’m sure the scale at which they sell their goods in India more than compensates for the restrictions,” she added.
Continuity or change?
Investors will be in wait-and-watch mode until polling ends and India’s new leader is elected on May 23. Whoever wins, business is unlikely to get the kind of boost seen in the last five years.
“Modi’s second term would focus more on the rural economy and job creation rather than big-bang reforms,” said Kishore. “The pace may fail to match that witnessed in the early years of his first term.”
A change of government would also be viewed cautiously. Modi’s main opposition, the Indian National Congress, also emphasized domestic issues like agriculture, employment and welfare programs in its manifesto released last week.
“A new leader will likely prolong investor uncertainty,” Kishore added.
“Broadly both parties are on the same page in terms of attracting foreign investment, increasing employment,” said Saha. “Irrespective of which government is formed … we have the human capital, our high skilled labor is really skilled, and in that sense we are an attractive destination to invest in.”