Is India rapidly losing out to other emerging economies as a preferred destination for investments, primarily due to the increasing concern over lack of a comprehensive anti-corruption regime and increasing inconsistencies in the country’s tax regime?

While the country seemed upbeat earlier in the week, after Moody’s gave India’s outlook a ‘stable’ rating, global investors seem to differ.

This view — and one of deep concern — was reiterated by most experts participating in the first Indo-Asian Legal Conclave in Singapore (commonly called the Singapore conclave) on November 29 and 30. According to experts, foreign investments in the pipeline have either slowed down or frozen, with corruption issues seen as a major roadblock.

Since Indian corporate bodies and their management teams have a different sensitivity and concern on anti-corruption issues than their potential foreign partners and parent companies, foreign companies eyeing to invest in India often raise their eyebrows at this divergence. Experts at the just-concluded conclave felt foreign investors are concerned about the ability and willingness of Indian businesses to take up more stringent anti-corruption norms, already formulated by the likes of United Kingdom and the United States and binding on foreign investors.

A lack of clarity on when, and in what manner, an improved anti-corruption regime in line with global practices will replace the Prevention of Corruption Act in India is making it worse for foreign investors, who have to comply with similar laws back home and cannot follow dual standards. From foreign investment perspective, the Indian anti-corruption regime needs to change at the earliest for Indian businesses to give way to a more institutionalised anti-corruption compliance regime, in line with global practices on transparency and corporate governance, it was felt.

Experts at the Singapore conclave also highlighted that issues of inconsistency and unpredictability creeping into Indian tax laws are emerging as a major concern and risk factor for both greenfield and brownfield investments.

Greenfield investments are foreign investments for setting up new projects, while brownfield investments are foreign investments in already existing projects.

Inaugurated by a sitting judge of appeals of the supreme court of Singapore and first secretary of the Indian high commission in Singapore, the conclave also had a large contingent of legal eagles from across the globe and India, chaired by Lalit Bhasin. Among others, the conclave think-tank included Cyril Shroff and this writer.

The event was supported by the Society of Indian Law Firms and the Services Export Promotion Council of India and several international bodies. The participants said they hope that India would take decisive action on both issues to ensure the country maintains its position as a preferred destination for foreign investments among other emerging economies.

So back to the poser we began with: is Moody’s ‘safety’ rating for India a good reason for the country to relax? Or is the concern shown by experts at the Singapore conclave a wake-up call?

Moody’s ratings are driven by India’s high savings and interest rates, and thus cannot be seen as reflecting the mood and concerns of foreign investors. India has to take a pick. But does the government really have options to choose from?

The ball is in our court and global investors are expecting us to take the shot.