<p>A complex and interconnected web of environmental factors shapes any reading of corporate confidence. India offers scale and growth. Policymakers argue that India’s booming consumption and demographic dividend will keep global investors interested – and anchored. That optimism isn’t misplaced: a young population, rising aspirations, and the steady formalisation of the economy continue to attract capital. Besides the size-of-market factor, there has been a longstanding belief, especially among Western investors, that India offers a relatively safer and legally secure business environment. But the calculus is rarely that simple.</p>.<p>Critics, as well as some seasoned insiders, highlight how India’s arbitrary processes often turn every permit or clearance into a negotiation. Regulatory certainty, crucial for long-term investment, often yields to realpolitik. Yet some companies thrive, investing not just capital but also diplomatic efforts to smooth the road ahead. Internal sceptics are often sidelined as the “India story” is pitched up the chain.</p>.<p>The inflection point tends to occur when the due process that companies expect as part of the deal fails to unfold as planned. Panic sets in within the dovecotes at the corporate headquarters, and those who have taken the risk of entering a growing market tend to be seen as responsible. Those who championed the India strategy suddenly find themselves having to explain, sometimes defend, why things fell apart.</p>.<p>Take, for example, the quiet but telling exit of Holcim, one of Europe’s largest cement conglomerates, just a few years ago. Having spent decades building a significant footprint in India – modernising facilities, introducing efficiencies, and creating scale – it abruptly sold off its entire India business to a desi biggie. While market-watchers cheered on the size of the acquisition and the speed with which the domestic conglomerate took over, seasoned observers intuitively knew that something deeper was at play. The exit wasn’t just about consolidation or shifting focus. It was about fatigue with compliance inconsistencies, shifting goalposts, and a business environment where you can never plan even taxation with certainty. The message? Sometimes it’s easier to write off India as “non-core” than to continue navigating its institutional maze.</p>.<p>The telecom sector tells a similar cautionary tale. Foreign players including Etisalat (UAE) and Telenor (Sweden) have exited India bruised, though none more visibly than the Russian-backed Sistema. It entered with fanfare, invested heavily, and enjoyed diplomatic backing, only to get entangled in the 2G spectrum scandal and retreat at great cost. What began as strategic expansion quickly became a lesson in how regulatory opacity and legal uncertainty can derail even the best-laid plans. Today, the duopoly in the sector troubles the government, but finding a global major to step in is difficult.</p>.<p>Another intriguing example is a global ground-handling company Çelebi. It promised to modernise passenger and cargo operations when it joined India’s burgeoning aviation industry, and made a significant impression at large airports. Despite India’s declared intention to improve airport infrastructure and attract top-tier companies, its operations have more recently been marred by rumours of turf wars and uncertainty surrounding concession renewals. There is a clear contradiction.</p>.<p><strong>Restoring confidence</strong></p>.<p>Often, when things go awry, companies opt to remain silent. They aim to preserve local investments before making a clean exit. Legal action is rare and public complaints are rarer. After all, India remains a market you may want to return to. What does leak out, however, is a mix of surprise and simmering suspicion. “We didn’t expect this,” is the most common refrain. Some blame rivals for queering the pitch. Others acknowledge that they may have underestimated the sheer stamina required to do business here.</p>.<p>One cannot miss the irony. Many of these foreign firms contributed to the development, expansion or modernisation of sectors that local players now dominate. Yet, they were outmanoeuvred, sometimes based on merit, and frequently by less savoury means, and always by skipping steps of “due process” that global companies (even Indian ones) expect. India has many advantages. Our economy is becoming increasingly digitalised, and we have the scale, talent, and innovation to support it. But confidence, once shaken, is not easily restored.</p>.<p>Fair play assurance is just as important as ease of entry. India must ensure that its regulatory, legal, and administrative institutions perform effectively both in theory and practice if it hopes to solidify its position as a major destination for foreign investment. After all, investors wager on more than just markets. They bet on systems. And just like cement, corporate confidence takes time to solidify, but if the foundation isn’t sound, it can fall apart instantly.</p>.<p><em>(The writer is a practitioner development economist and former <br>secretary, GoI)</em></p>
<p>A complex and interconnected web of environmental factors shapes any reading of corporate confidence. India offers scale and growth. Policymakers argue that India’s booming consumption and demographic dividend will keep global investors interested – and anchored. That optimism isn’t misplaced: a young population, rising aspirations, and the steady formalisation of the economy continue to attract capital. Besides the size-of-market factor, there has been a longstanding belief, especially among Western investors, that India offers a relatively safer and legally secure business environment. But the calculus is rarely that simple.</p>.<p>Critics, as well as some seasoned insiders, highlight how India’s arbitrary processes often turn every permit or clearance into a negotiation. Regulatory certainty, crucial for long-term investment, often yields to realpolitik. Yet some companies thrive, investing not just capital but also diplomatic efforts to smooth the road ahead. Internal sceptics are often sidelined as the “India story” is pitched up the chain.</p>.<p>The inflection point tends to occur when the due process that companies expect as part of the deal fails to unfold as planned. Panic sets in within the dovecotes at the corporate headquarters, and those who have taken the risk of entering a growing market tend to be seen as responsible. Those who championed the India strategy suddenly find themselves having to explain, sometimes defend, why things fell apart.</p>.<p>Take, for example, the quiet but telling exit of Holcim, one of Europe’s largest cement conglomerates, just a few years ago. Having spent decades building a significant footprint in India – modernising facilities, introducing efficiencies, and creating scale – it abruptly sold off its entire India business to a desi biggie. While market-watchers cheered on the size of the acquisition and the speed with which the domestic conglomerate took over, seasoned observers intuitively knew that something deeper was at play. The exit wasn’t just about consolidation or shifting focus. It was about fatigue with compliance inconsistencies, shifting goalposts, and a business environment where you can never plan even taxation with certainty. The message? Sometimes it’s easier to write off India as “non-core” than to continue navigating its institutional maze.</p>.<p>The telecom sector tells a similar cautionary tale. Foreign players including Etisalat (UAE) and Telenor (Sweden) have exited India bruised, though none more visibly than the Russian-backed Sistema. It entered with fanfare, invested heavily, and enjoyed diplomatic backing, only to get entangled in the 2G spectrum scandal and retreat at great cost. What began as strategic expansion quickly became a lesson in how regulatory opacity and legal uncertainty can derail even the best-laid plans. Today, the duopoly in the sector troubles the government, but finding a global major to step in is difficult.</p>.<p>Another intriguing example is a global ground-handling company Çelebi. It promised to modernise passenger and cargo operations when it joined India’s burgeoning aviation industry, and made a significant impression at large airports. Despite India’s declared intention to improve airport infrastructure and attract top-tier companies, its operations have more recently been marred by rumours of turf wars and uncertainty surrounding concession renewals. There is a clear contradiction.</p>.<p><strong>Restoring confidence</strong></p>.<p>Often, when things go awry, companies opt to remain silent. They aim to preserve local investments before making a clean exit. Legal action is rare and public complaints are rarer. After all, India remains a market you may want to return to. What does leak out, however, is a mix of surprise and simmering suspicion. “We didn’t expect this,” is the most common refrain. Some blame rivals for queering the pitch. Others acknowledge that they may have underestimated the sheer stamina required to do business here.</p>.<p>One cannot miss the irony. Many of these foreign firms contributed to the development, expansion or modernisation of sectors that local players now dominate. Yet, they were outmanoeuvred, sometimes based on merit, and frequently by less savoury means, and always by skipping steps of “due process” that global companies (even Indian ones) expect. India has many advantages. Our economy is becoming increasingly digitalised, and we have the scale, talent, and innovation to support it. But confidence, once shaken, is not easily restored.</p>.<p>Fair play assurance is just as important as ease of entry. India must ensure that its regulatory, legal, and administrative institutions perform effectively both in theory and practice if it hopes to solidify its position as a major destination for foreign investment. After all, investors wager on more than just markets. They bet on systems. And just like cement, corporate confidence takes time to solidify, but if the foundation isn’t sound, it can fall apart instantly.</p>.<p><em>(The writer is a practitioner development economist and former <br>secretary, GoI)</em></p>
