It makes perfect sense that the Prime Minister exhorts industry leaders to shun negative sentiments, assuring them that “government will not leave any stone unturned to ensure that the economy rebounds”. Manmohan Singh captivated his audiences.

But all this is symptomatic of the type of people we have become in India. We complain at cocktail parties and dinner tables about the economy, governance, decision making, corruption, squalor, general lack of integrity, disunity. Yet, we have learned to excuse the inexcusable and explain away the unexplainable.

Unfortunately, foreign investors cannot pretend all is well with India as an investment destination.

Trust and openness

Last week, European investors who met at the Brussels-headquartered Confederation of European Chambers of Commerce & Industry said: “It is hard to keep hearing the new announcements from India on FDI and that more reforms will be made. But, mere announcements will not entice investors. What about improving the ground realities? What about now?” It seems clear that India’s inertia has led to a shift in European investors’ outlook. Just a couple of years ago, India was considered the perfect place to invest in. Now, European interest has faded.

At the Brussels congregation, large European investors in several key sectors — particularly infrastructure, energy, transportation, health, communications — indicated they do not regard India as “the leading edge for investment and growth.” The conclave affirmed that while Indian policies are based on what should be, “ground realities make it impossible for European businesses to work on predictable projections and rational business planning”.

Naturally, why would anybody invest in a market that can be marred the next morning by leaders and bureaucrats with reckless, erratic demands?

The problem is not the Indian market. The problem is those in control of it. To attract large investors, we must pursue a rational business culture and guarantee transparency and policy stability.

So, what do European investors believe are some of the critical ingredients to attract FDI? Singh and his team must recognise that overseas investment is not something that companies undertake lightly. Companies have many demands on their capital, and are under a strong obligation to their shareholders to generate returns on their investments. So, before committing, companies take great care to ensure that they are making the right decisions.

Once a decision to invest is made, the foreign investor expects that the government authorities in the host country who shape the regulatory environment become key stakeholders. The vital ingredient of openness and trust on both sides is tacitly assumed.

Good governance

It is also vital that contractual obligations of the host country are upheld. Every country has its own laws to protect its own interests. But when a foreign investor enters legal obligations, there is a strong expectation of receiving fair and equal treatment.

Equally, if not more important, is a transparent, predictable legal system, free from corruption and undue influence. Let investors know the rules of the game, and give clear, enthusiastic signals that the government is committed to sector-led growth.

The timely granting of approvals and licences is very important, as is the need to ensure that deadlines are met. Investors expect to be able to work to reasonably predictable timetables.

The bottom line — European investors want in India an environment where contracts and the rule of law are respected. Furthermore, they expect good governance. This means an accountable, responsive and responsible government.

A country that fosters private investment at home will also attract investors from abroad. Unfortunately, Arcelor-Mittal scrapping its planned Odisha steel project was widely reported in European media, clearly showing that India is not able to leverage even the diaspora for development. And, what is worse is that, instead of the government sitting up and thinking of solutions to all these challenges, everyone is talking about 2014. Perhaps, it may do well for India to move from ‘talk’ to ‘action’.

The author is former Europe Director, CII, and lives in Cologne, Germany.

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