Domestic Capital and Homegrown Talent Could Make it India’s Most Investable Decade

India is still reporting world-beating growth, but one market signal refuses to clap on cue: foreign money. Despite headline GDP growth around 8%, foreign inflows into India have “dried up,” implying that outsiders suspect the reported numbers mask underlying weaknesses.

India’s real strength will not be proved by GDP prints. It will be proved when India starts importing more capital and exporting fewer workers. It is better read as a checklist for what India must do in its next phase of growth. The country is getting larger, more visible, more ambitious. The question is whether it can convert that scale into a deeper investment cycle at home and a stronger incentive structure for its most skilled workers to build their lives in India, not abroad.

The outflow that hurts most is skilled labour

India has always exported talent. That is not new, and in many ways it is a strength. The problem arises when the outflow accelerates and starts skewing toward exactly the skills India needs to climb into advanced industries.

Net emigration has risen to about 675,000 people each year this decade, up from around 325,000 annually in the 2010s. Only Pakistan, Bangladesh and Ukraine have seen a larger exodus. Part of India’s outflow is brain drain, which is described as a loss of the skilled workers needed to compete in advanced fields. One-third of Silicon Valley’s tech workforce is now Indian.

Then there is weak job creation at home. Even at the Indian Institutes of Technology, 38% graduated without a single job offer from a campus recruiter in 2024. There is also migration toward destinations still friendly to immigrants, such as the UAE and Saudi Arabia, drawn by a construction boom.

The implication is not that migration is inherently bad. It is that the balance is off. If a growing share of high-skill workers conclude that the best returns on their education are abroad, India will find it harder to build the capabilities it wants to lead in, whether that is deep tech, advanced manufacturing, or R&D-heavy services.

New risks are compounding old frictions

New external and strategic concerns are holding back foreign investors, including India’s deteriorating relations with neighbours, tariff conflict with Washington, and doubts about India’s tech potential.

R&D spending helps to make the point. China and South Korea spend more than 2.5% of GDP on research and development, while India’s outlays last year were just 0.65% of GDP.

Attracting high-quality, long-duration capital is partly about ease of doing business, but it is also about confidence in a country’s ability to build the next generation of industrial and technological capability. If India wants more capital, it has to sell more than market size. It has to sell credibility in execution and capability-building.

Equity markets tell a similar story, with one bright offset

Emerging market equities saw net inflows last year after a long drought, but India experienced record net outflows of $19bn. Domestic buyers countered foreign selling, with households increasing their historically low exposure to equities, but the Indian market still lagged peers.

This detail matters because it hints at a potential internal stabiliser: the rise of domestic market participation. If Indian households continue to deepen equity ownership and institutional pools expand, India becomes less hostage to foreign flow cycles.

The point is investment, not applause

India’s weaknesses point to the way forward. Steps taken over the past year such as streamlining the labour code and simplifying bankruptcy rules could finally spur new investment. Domestic private investment has been held back by the same regulatory maze and overzealous bureaucracy that foreigners complain about. Boosting both domestic and foreign investment is key to creating jobs and stemming the exodus.

Capital inflows are a proxy for whether the system is investable at scale. And job creation is not a welfare metric. It is the mechanism that keeps talent anchored and converts demographics into productivity.

What would “success” look like from this framework

India’s true growth rate will become clearer over time as technical distortions wash out. Regardless of what that number is, the tell-tale sign of a miracle path will appear when India imports more capital and exports fewer workers.

Importing more capital means becoming easier to invest in, less arbitrary to operate in, and more credible in its long-run technology and manufacturing ambitions. Exporting fewer workers means building enough high-quality jobs, at home, to retain skilled graduates and offer a compelling alternative to migration.

The good news is that none of this requires a reinvention of India’s growth model. It requires tightening the link between headline growth and lived opportunity. It requires reforms that reduce friction. And it requires sustained investment in capability.

Chief Brand & Investor Relations Officer

Sneha Dadrwal

Frequently Asked Questions

Q: What’s the core claim of the piece?

A: India’s next phase of success won’t be “proved” by GDP prints alone. The more meaningful proof is whether India attracts more capital and retains more skilled workers.

Q: Why does the piece argue foreign money hasn’t matched India’s growth headlines?

A: Because it highlights a mismatch: headline growth looks strong, but foreign inflows have weakened, which Sharma interprets as skepticism about what the top-line numbers are capturing.

Q: What does “importing more capital and exporting fewer workers” mean in plain terms?

A: It’s shorthand for two outcomes: India becoming a more attractive, predictable place to invest at scale, and India creating enough high-quality domestic opportunity that fewer skilled people feel compelled to leave.

Q: Why does the piece treat skilled emigration as a bigger problem than migration in general?

A: It argues the concern isn’t migration per se, but the mix and acceleration: if more high-skill workers leave, it becomes harder to build advanced capabilities at home.

Q: What does it say is holding back capital inflows structurally?

A: It points to persistent friction in the investment environment, including land acquisition complexity and labour-market rigidity, and frames these as “Licence Raj” style constraints that raise the cost of building capacity.

Sources

Financial Times