The Impact of Tariff Uncertainty on Foreign Investment in India
UPSC Relevance
Prelims: Indian Economy (Investment Models, Foreign Investment - FDI, International Trade, Tariffs); Important Reports/Data sources (CMIE).
Mains:
General Studies Paper 2 (International Relations): Effect of policies and politics of developed countries on India’s interests.
General Studies Paper 3 (Economy): Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment; Investment models.
Key Highlights from the News
In the first quarter of the 2025-26 fiscal year (April-June), foreign companies dropped projects worth approximately ₹2 lakh crore in India. This is the highest rate in the last decade.
This data is revealed by the Centre for Monitoring Indian Economy (CMIE).
Economists state that Tariff-related uncertainty between India and the United States is the primary reason for this.
During this period, there was also a significant decrease in new project announcements by foreign investors in the country.
The ratio of dropped projects to new projects indicates a pessimistic investor mood.
The US President's policy of encouraging American companies to invest back in their own country (reshoring) is also a reason for this withdrawal.
Experts express hope that most of these investments will return once there is clarity on tariff issues.
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