India’s FDI debate is missing a key factor that can unlock growth—judicial reform

Despite India's impressive record of attracting significant gross Foreign Direct Investment (FDI) inflows, a critical disconnect persists: the nation struggles with the net retention of these investments. The emerging consensus among policy circles and foreign capital desks points to judicial uncertainty—specifically, the protracted timelines and unpredictable outcomes of commercial disputes—as the primary operational drag hindering long-term capital deployment and ultimately, growth. This gap between announced investments and their full operationalization reveals a deep structural flaw, undermining India's ambitions to become a global manufacturing and supply chain hub. While government initiatives like the Insolvency and Bankruptcy Code (IBC) and dedicated Commercial Courts have aimed to streamline business law, the sheer backlog and procedural complexities within the broader judicial system continue to deter Foreign Institutional Investors (FIIs) seeking predictable and efficient dispute resolution mechanisms. Recent data shows that the average time for contract enforcement remains among the highest globally, frustrating multinational corporations. Moving forward, the debate must shift beyond simply attracting capital to critically examining the judicial infrastructure that underpins business trust. Expect increased pressure on the Ministry of Law and Justice to accelerate systemic reforms, potentially including further amendments to the Arbitration and Conciliation Act and bolstering the capacity of Commercial Courts. Without a more robust, efficient, and transparent judicial system, India risks seeing its hard-won FDI figures remain mere gross inflows, failing to translate into sustained economic output and job creation.