Stories
Policy Credibility Key to Sustaining Foreign Investment in India
- •Kyunghoon Kim from KIEP emphasizes that India must maintain policy credibility and continuity to secure long-term foreign investment inflows beyond strong GDP growth alone.
- •India recorded a robust 7.8 per cent GDP growth in the first quarter, driven by strong performance in investment, consumption, manufacturing, and services.
- •Initiatives like production-linked incentive schemes and the India Semiconductor Mission are successfully attracting both international and domestic investments into industrial sectors.
- •Experts warn that strong GDP growth must translate into adequate job creation, requiring targeted education and skills training to prepare workers for emerging industries.
- •Inflation risks, particularly driven by external pressures like the Middle East crisis, and the availability of skilled labor remain critical factors to monitor for sustained economic growth.
Key Questions Answered
India's stronger-than-expected GDP growth of 7.8 percent in the first quarter was supported by robust investment, consumption, and exports. Government capital expenditure, private investment, favorable financial conditions, and strong demand backed investment, while services and manufacturing drove growth on the supply side.
According to Kyunghoon Kim from KIEP, strong economic growth alone is not enough to reassure global investors about the long-term business environment. Maintaining policy credibility and continuity ensures global investors remain confident that business-friendly support and policies will continue in the coming years.
Inflation remains a risk due to potential pressures on food, fuel, and fertilizer prices from the Middle East crisis, with inflation having risen to 5.5 percent. However, India could grow at around 7 percent over the medium term and potentially become the world's third-largest economy by 2031 or 2032.
