FDI falling in India

• Falling FDI in both absolute and relative terms indicates a lack of investor confidence. It should jolt politicians back to governance and building on the 1991 reforms. 
• A UN report on FDI in 2010 makes this point sharply. Though global FDI flows increased by a percentage point over the last year, developing economies' share jumped 10%. For the first time ever, more than half of global FDI travelled to emerging markets. However, FDI inflows into India declined by a whopping 31.5%. And that's not in relative but in absolute terms. 
• In other words, it's not just that India is getting a smaller share of a bigger pie - indicating its relative uncompetitiveness among emerging markets. It's that the size of the pie itself has shrunk for India - by almost a third. That ought to be enough to set alarm bells clanging for our economic managers. 
• Crucial to India's rejuvenation, FDI builds infrastructure, brings in best practices in technology and management, and makes the Indian economy more globally competitive. Once built, infrastructure attracts more FDI, triggering a virtuous circle. 
• The UN data shows that the biggest FDI gainers were countries that emphasise infrastructure, such as Singapore and China. 
• All of this puts the decline in FDI on an altogether different plane from the recent exit of FII which is essentially speculative and sensitive to short-term issues such as inflation, interest rates and politics. India's poor performance in all of these explains why capital flight touched nearly a billion dollars in the first 15 days of this year. The solution isn't beyond us. It's in our past. India must work at enticing FDI, as it did during the 1990s.