We need serious reforms to boost FDI

I will say the quiet part out loud: scrapping the FII bond tax is a good move, but it is a Band-Aid, and we are treating it like surgery.

Here is what it actually does. By exempting foreign investors from tax on government securities, the government hopes to pull in $35 to $50 billion of foreign money. Economists at several banks have said as much.

That money plugs this year's balance of payments gap. The hole where more dollars are leaving the country than coming in.

So far, so sensible.

But notice what we are celebrating. A one-time patch for a one-year problem.

Next year the gap reappears, and we will be back hunting for another clever exemption to plug it. That is not a capital strategy. That is living advance to advance.

Now hold that against our stated ambition.

Invest India, a government-affiliated body, wants foreign direct investment to rise from about $70 billion a year to an average of $110 billion a year across 2025 to 2030.

That is a $40 billion-a-year jump. Every year. For five years.

And here is my honest problem: The target is published. The mechanism is missing.

The energy we spend engineering tax tweaks to attract flighty bond money would deliver far more if pointed at the structural reforms that attract sticky factory money.

Think land. Think contract enforcement and the speed of our courts. Think about the cost and reliability of power. Think of the maze of compliance a foreign manufacturer wades through before laying a single brick.

Fix three of those properly, and you would not be chasing $50 billion. It would arrive on its own.

The Band-Aid will hopefully stop this year's bleeding. I get why we reached for it.

But you do not build a five-year, $110 billion ambition on Band-Aids. You build it on surgery nobody enjoys scheduling. We keep choosing the patch because it stings less.

So, it’s about time that we started talking about serious reforms.