India, March 3 -- The crucial issue related to foreign direct investment (FDI) is the design, rather the architecture of the fast-rising and high outflows. An analysis shows that the imbalance between inflows and outflows is not due to a single policy error or a sudden loss of investor confidence. It reflects deeper structural shifts linked to the nature of FDI, India's liberalisation trajectory, and evolving character of global capital. Several factors contribute to the existing trends and patterns, which include disinvestments by the Indian state and foreigners.

A leading factor to the large outgo of FDI lies in the inflows. Since the mid-2000s, the composition of foreign investors has changed. A growing share of ownership is by global...