Despite a good growth rate, we are not growing fast enough ?

What’s most surprising is that corporate revenues in any country typically grow and decline in tandem with the economy. However, last year, corporate revenue growth for listed companies in India was barely half that of GDP growth. Instead of being complacent with GDP figures, Indian policymakers need to address the problems.

One of the key signs of weakness is that India is migrating more people than ever before and attracting far less capital. This decade, an average of 675,000 people have migrated abroad each year, compared to 325,000 in the 2010s.

Only Pakistan, Bangladesh, and Ukraine have seen larger outflows. China is still losing about 300,000 people annually, similar to the previous decade. A significant portion of India’s outflow is a “brain drain”—the very skilled professionals it needs to compete in advanced sectors. As a result, Indians today comprise nearly one-third of Silicon Valley’s tech workforce.

Young people are struggling to find jobs. Even at the prestigious IITs, 38% of students in 2024 did not receive a single job offer during campus placements. In search of better employment, many Indians are moving to the few countries that are still relatively friendly to expatriates—such as the UAE and Saudi Arabia—where the construction boom has attracted them.

India has long been able to attract limited capital from abroad, largely due to the persistent “license raj.” This makes acquiring land or hiring or firing workers prohibitively expensive and complex. Asian economies that have experienced rapid and sustained growth—such as China in the past and Vietnam in recent years—have seen net FDI exceed 4% of GDP during their boom years.

In India, this figure has never exceeded 1.5% and has now fallen to a mere 0.1%. Over the past decade, India’s ranking by net FDI/GDP has slipped from 12th to 19th among the 25 largest emerging countries.

In addition to India’s long-standing reputation as a difficult place to do business, some new risks are also deterring foreign investors. These include New Delhi’s deteriorating relations with neighboring countries, a tariff war with the United States, and doubts about India’s technological capabilities. China and Taiwan spend more than 2.5% of their GDP on research and development (R&D), while India’s spending was just 0.65% last year. It’s not surprising that India doesn’t have any major names in the AI ​​field.

These weaknesses are also impacting financial markets. After a long drought, net investment flows finally returned to the stock markets of emerging economies last year. However, India, in contrast, saw a record net outflow of $19 billion. Heavy selling by foreign investors was countered by domestic investors, with households showing historically low interest in increasing their equity holdings. Despite this, the Indian stock market lagged significantly compared to its peers last year.

India needs much more foreign capital to achieve rapid growth, as its domestic savings base is insufficient. Unlike the economic miracles of East Asia, India’s manufacturing sector has been weak, so it has never become an export powerhouse and has almost always run a current account deficit. It is no coincidence that domestic private investment in India has also been sluggish over the past decade. India will only be on the path to an ‘economic miracle’ if more capital comes into India and less talent leaves.

Young people are struggling to find jobs. Even at IITs, 38% of students in 2024 did not receive a single job offer during campus placements. Many Indians are migrating to other countries in search of better employment.