Temasek, others can invest more if the ecosystem is conducive

The announcement by Temasek Holdings that it intends to deploy $3 billion-4 billion annually in India is good news, especially against the backdrop of less-than-desirable foreign direct investment (FDI) that we get. Net FDI, for instance, had a steep fall of over 96 per cent, to just $353 million, in 2024-25. There was recovery too, though, as in April received net FDI of $3.95 billion, the most in 35 months.

The exposure of Singapore’s sovereign wealth fund to India has increased to over $50 billion, as of March this year, up from $37 billion a year earlier. In March, Temasek picked up a 10 per cent stake in Haldiram’s at a valuation of around $10 billion, which was termed as a “prized asset.”

“We’ve been very active in investing behind family-run businesses, we can invest across the value chain,” Vishesh Shrivastav, managing director of Temasek’s India investment team, said in a media interview. Earlier, Temasek invested in many family businesses in India, such as Manipal Hospitals and Dr Agarwal’s Health Care.

Temasek and other investors can become more bullish about India if our policy makers get their act together. To be sure, investors are closely watching India, which is widely regarded as one of the most promising emerging markets. With a large domestic market, a young and growing population, a thriving services sector, and increasing digital penetration, India offers tremendous potential for high returns over the long term.

However, this optimism is often tempered by concerns over policy inconsistency, regulatory unpredictability, and bureaucratic inefficiencies. If Indian policymakers can address these challenges with clarity, consistency, and foresight, institutional investors like Temasek may significantly ramp up their commitments.

Temasek has already invested in sectors such as financial services, technology, and healthcare in India. Yet, its future decisions will be influenced by the ease with which it can navigate India’s regulatory environment, repatriate profits, and find long-term policy stability.

A proactive policy framework, free of sudden reversals or overregulation, would send a strong signal of reliability. For instance, India’s ongoing tax disputes and retrospective taxation policies have, in the past, deterred many investors. While some steps have been taken to reverse such measures, greater transparency and policy continuity are needed to rebuild long-term trust.

Additionally, infrastructure bottlenecks, delays in project clearances, and land acquisition hurdles are key concerns. If the government expedites structural reforms—such as simplifying labour laws, digitising approval processes, and strengthening contract enforcement—it would greatly enhance the investment climate. Investors are also seeking greater alignment between central and state policies, as contradictions and delays in implementation at the state level can hamper project execution.

Moreover, geopolitical tensions and trade dynamics increasingly factor into capital flows. With global investors diversifying away from China, India stands to benefit—but only if it positions itself as a stable and reform-oriented alternative. Clear communication from policymakers, timely execution of flagship initiatives like Make in India and Digital India, and consistency in environmental and ESG-related norms will help boost investor confidence.

Temasek and other institutional investors are not just looking for growth—they are looking for predictable, rules-based systems where they can make long-term bets without fear of regulatory shocks. If Indian policymakers can deliver on this front, India could attract not just higher investment volumes but also longer-term, strategic capital, thus driving deeper transformation across its economy.