India, March 2 -- India mostly measures success in the foreign direct investment (FDI) arena by a single number. How much capital (money) came in during a year. When FDI inflows rise, the credit is instantly given to the reforms, and other policy measures. When they fall, global uncertainty and external factors are blamed, further liberalisation is promised, followed by additional "Ease-of-Doing-Business" steps. States compete to host investors' summits, incentives multiply, and the country's rankings improve. Over the past two-three decades, wooing FDI has quietly become an objective rather than an instrument. Hence, there is little systematic assessment of the overall economic impact.

In the recent past, the phenomenon of high gross in...