Reform is No Longer the Biggest Drag on India’s Economic Ambitions

A few weeks ago, the Chief Justice of India, NV Ramana plot in London that India can become a prime destination for global investment due to its independent judiciary and rule of law. Just days later, that theory was put to the test in the troubled state of Uttar Pradesh: There, in the capital city of Lucknow, a sprawling new shopping mall built by a prominent Indian Muslim businessman, Yusuff Ali, was hit by a landslide. . of Hindu nationalist attacks.

Ali’s Lulu Group, which has built a significant footprint in the Middle East over the past decades, had brought in a massive investment of over $250 million and as many as 15,000 jobs with its new shopping center in Lucknow. However, shortly after Prime Minister Yogi Adityanath opened the mall, Hindu nationalist groups reclaimed that 70 percent of the staff is Muslim.

When mall management refuted that charge, a video surfaced showing a handful of people offering muslim prayers in a corner of the mall. Soon the Hindu nationalists retaliated reciting Hindu chants in response.

It wasn’t just Hindu nationalists who wanted a piece of the controversy. Last week, Muslim leader Azam Khan of the opposition Samajwadi Party reclaimed that Yusuff Ali is a fundraiser for the Hindu nationalist Rashtriya Swayamsevak Sangh (RSS), widely seen as the ideological fount of the ruling Bharatiya Janata party (BJP). Khan further said that Ali “wants to create communal violence in the state.”

The series of controversies, which took place less than a month after the mall opened, starkly highlighted the significant long-term challenge facing India’s efforts to become a global investment destination.

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In the last fiscal year, India benefited from a record entry of foreign direct investment (FDI), to the tune of nearly $80 billion. Prime Minister Narendra Modi’s government attributed this to his “liberal and open” FDI policy. In more recent times, however, a rapidly weakening rupee, war-fueled inflation in Ukraine and rising interest rates in the West could deter new inflows. So far this year, foreign investors have withdrawn nearly $30 billion of Indian shares, also a record.

Communal tensions are also not lost on global investors and companies. At the beginning of this year, the reports said that global tech companies headquartered in Bangalore, long famous as India’s Silicon Valley, were looking to relocate to the neighboring state of Tamil Nadu after bearing the brunt of mounting communal conflicts. The state of Karnataka, of which Bangalore is the capital, is governed by the BJP and has seen a series of clashes and controversies in recent months.

Earlier this year, the Karnataka government introduced the so-called law against conversion to avoid forced religious conversions. In the run-up to its approval, dozens of Christians and churches were attacked by Hindu nationalist hooligans. Meanwhile, in some public universities, Muslim women were forbidden to attend classes with headscarves. That move was followed by more clashes between Hindu and Muslim students. Muslim meat sellers were also managed after a BJP leader demanded a ban on halal meat.

Karnataka’s worsening social atmosphere even forced leading industrialists to speak out. In a tweet, Kiran Mazumdar Shaw, founder of the biotech company Biocon, appealed to Chief Minister Basavaraj Bommai “no [to] allow such community exclusion.

Modi has long expressed his ambition to turn India into a global investment hotspot, and none of it is helpful to that cause. The rapid marginalization and exclusion of India’s 200 million Muslims will significantly undermine the country’s economic potential, and frequent communal clashes will deter global companies from making long-term investments.

In 2021, more than 160,000 Indians renounced their citizenship worldwide, the highest number recorded in the last five years. That figure, in fact, had steadily grown in the previous five years, it was only hampered in 2020 by the pandemic. This year, some 8,000 millionaires are expected leaving India, placing it third on the list of countries losing wealthy people, after Russia and China, according to global migration consultancy, Henley and Partners.

Politically, there are few encouraging signs that any of this is going to change. This year, the last remaining Muslim legislator in the BJP he resigned, thus leaving the BJP without a single Muslim among its 395 members in Parliament.

But if India is to successfully become a global investment destination, Modi will need to signal to the world that he is building a more harmonious and inclusive democracy.

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