India's challenging business environment, 'sense of fear' drive entrepreneurs abroad, says Ruchir Sharma

The remarks come in the aftermath of the Lok Sabha elections, where a spirited opposition performance denied BJP a majority in the lower house and reduced the NDA's seat tally to 293.

Investor and author Ruchir Sharma said that entrepreneurs find it challenging to do business in India and prefer establishing their firms in places like Dubai and Singapore.

In an exclusive interview to Network 18's Zakka Jacob and Bodhisatva Ganguli, Sharma cited concerns over India’s “out of control” regulatory machinery and investigative agencies as key factors contributing to this trend.

Read: Full transcript of Ruchir Sharma's interview

Sharma, Chairman of Rockefeller International, noted that the general macroeconomic management of India has been “reasonably good”. However, the microeconomic side and overhang of investigative agencies remain a concern, driving away domestic talent.

“One of the biggest criticisms of the government is that the regulatory state is out of control. The investigative agencies are out of control. There is still a sense of fear for average entrepreneurs,” Sharma said.

Elaborating further on the dilemma that businesses face, Sharma pointed out that it’s difficult for firms to work without breaking rules and regulations in the current set-up.

“In India’s case, often rules and regulations are made in such a way that if you don’t break them then you can’t get anything done. The government ends up having a dossier on you that it can use strategically, which leads to a sense of fear. In China, it was called the original sin,” he said, adding that the country should look at that more closely to protect that talent from draining away.

Moreover, the prominent investor said the country needs to do more to break out of this “6 percent-type growth rate, which seems to have become our steady state equilibrium”.

“We need our private investment to pick up.”

Moreover, Sharma pointed out the issue of underemployment, noting that while India is experiencing a stock market boom, it primarily benefits a limited segment of the population. “The stock market boom is affecting maybe 20 million to 30 million people, but 500 million to 600 million people are not impacted by it,” Sharma said.

Separately, during the conversation, Sharma pointed out that the returns on the BJP-led government’s Hindutva strategy are diminishing and the demand for strong opposition is growing.

The remarks come in the aftermath of the Lok Sabha elections, where a spirited opposition performance denied BJP a majority in the lower house and reduced the NDA's seat tally to 293, from 353 in 2019.

Congress and several other parties had raised the issue of the government using investigative agencies such as the Enforcement Directorate and the Income Tax Department to curb the Opposition before the Lok Sabha elections 2024. It was also alleged that the government was forcing businesses, who were facing cases of illegality, to make donations through the now-shelved electoral bonds.