Foreign Investments to India Will Surge If Modi Becomes PM

However, investments in the services sector, which includes banking, insurance, research and development and outsourcing among others, dipped by 54 percent to $2.18 billion during April-February period of the last fiscal. Domestic investments have also dropped sharply, pulling down economic growth to its lowest level in a decade. India's top economic policymakers, including chairman of the Prime Minister's Economic Advisory Council C. Rangarajan and Planning Commission Deputy Chairman Montek Singh Ahluwalia, have also admitted that the decline in savings and investments and delays in completion of projects have hurt economic growth.

India's gross domestic product (GDP) growth fell to 4.5 percent in fiscal 2012-13, the worst performance since 2002-03, and is estimated to grow at 4.9 percent in the year ended March 31, according to the Central Statistical Office (CSO). Prasad said low growth does impact investors' sentiments but the bigger issues are related to corruption and policy. "The whole world is watching India. This election is a make-or-break for the Indian economy," said Prasad, adding the economy may fall in the trap of slow GDP growth if a strong and stable government is not formed after the elections.

Prasad said just setting FDI limits higher, as the government has done in the past two years, is not enough. "The focus has to be on implementation and there should be consistency in the policy," he said. On the BJP's announcement that it will reverse the FDI policy in multi-brand retail, Prasad said: "Investors expect consistency in the policy. Reversal of any policy will have an adverse impact." Prime Minister Manmohan Singh's government has allowed up to 51 percent FDI in multi-brand retail. The announcement was made in September 2012 but no foreign investment has taken place in the sector so far. In its election manifesto the BJP has said it would keep FDI out of multi-brand retail.