What are the possible long-term impacts of a negative net FDI on India's economic growth?

Foreign Direct Investment (FDI) is a key driver of economic growth, bringing in capital, technology, and management practices. When a country like India experiences negative net FDI (i.e., more FDI outflows than inflows) for a sustained period, it can have several long-term implications for its economy.

• Reduced Capital Availability: Lower FDI inflows mean less foreign capital for investment in infrastructure, industries, and services, potentially slowing down economic growth.
• Impact on Employment: FDI often creates jobs in sectors such as manufacturing and services. Negative net FDI can lead to fewer employment opportunities and slower job creation.
• Technology and Skill Transfer: FDI brings advanced technology and skills. Reduced inflows may hamper technological upgradation and skill development in the domestic workforce.
• Balance of Payments Pressure: Persistent FDI outflows can worsen the capital account balance, putting pressure on foreign exchange reserves and possibly affecting the stability of the rupee.
• Investor Confidence: Continuous negative net FDI may signal to global investors that India is less attractive for investment, which can further discourage future investments.
• Slower Industrial Growth: Sectors dependent on foreign investment, such as telecom, automobiles, and pharmaceuticals, may see slower expansion and innovation.
• Impact on Startups and Entrepreneurship: Reduced FDI inflows can limit funding options for startups and new ventures, affecting innovation and entrepreneurship.
• Potential Rise in External Borrowing: To compensate for lower FDI, India may rely more on external borrowing, increasing its debt burden and vulnerability to global financial shocks.