Land, GST and FDI Predictability Are India's Real Test for 2047

What India's Economists Say Must Change for the Next Growth Phase

India’s next phase of economic reform will be judged less by new policy announcements than by whether the country clears long-standing domestic bottlenecks, according to economists reacting to Prime Minister Narendra Modi’s Independence Day outline of “Sapta Dhara”—seven streams of strength meant to drive the economy toward the 2047 Viksit Bharat goal.

Two priorities stand out. First, land: Madras School of Economics Director N R Bhanumurthy argues that gaps in land records are a major reason western and southern states are pulling ahead of northern and eastern states in manufacturing. Fixing those gaps, he says, matters more than another headline package because the government wants manufacturing to rise from roughly 16–17% of GDP today to 25% by 2035.

Second, investment predictability. Crisil Chief Economist DK Joshi says India should look inward at land and ease-of-doing-business frictions, especially amid external uncertainty. Net foreign direct investment has fallen from an annual average near $40 billion between FY20 and FY22 to $7.65 billion in FY26, according to Reserve Bank of India data. India also terminated about 60 bilateral investment treaties in 2016, and the Finance Ministry announced a review of the model BIT in the FY26 Budget.

Beyond land, Joshi points to unfinished GST work—petroleum products remain outside the tax—and uneven compliance across states, while Bhanumurthy suggests waiting to assess the four consolidated labour codes before further labour changes. The message: the next phase is about implementation, not fresh frameworks.

Land, FDI and Unfinished Tax Reforms Hold Back the 2047 Plan

Why the Manufacturing Gap Runs Through Land Records

Bhanumurthy’s argument is that land acquisition in India is not only a legal question but a records question. Unclear ownership, boundaries and land-use status stall factory and infrastructure projects before finance is arranged. In his view, western and southern states’ manufacturing lead is partly a result of better-functioning land administration. The Centre has started to respond: the FY25 Budget offered fiscal support to states for three years for land administration, planning, usage and building bylaws. Since land is a state subject, Delhi can fund and incentivise, but it cannot directly deliver the reform.

Interpretation: a manufacturing jump from 16–17% of GDP to 25% by 2035 is implausible if land-intensive production cannot secure sites predictably. The early signal will be which states actually use the central support to digitise and clean land records.

The FDI Rebound Depends on a New Model BIT

The urgency is in the numbers. Net FDI fell from an annual average of about $40 billion in FY20–FY22 to $7.65 billion in FY26, per RBI data. Around 60 bilateral investment treaties were terminated in 2016, removing the protection many investors relied on in disputes. Joshi’s sequencing is that a more predictable domestic business environment must come first, after which a stable FDI policy can meet India’s capital needs. The concrete item to watch is the FY26 Budget’s promised review of the model BIT.

The risk is timing: if an updated model BIT takes years, foreign investors will keep pricing in uncertainty in sectors that depend on dispute protection—infrastructure, energy and manufacturing joint ventures.

GST and Labour: Existing Reforms Are Unfinished

Joshi notes petroleum products remain outside GST, which fragments the indirect tax system. The four labour codes were consolidated from 29 central laws, but enforcement varies by state. Bhanumurthy says the Centre should assess their impact before another round of labour changes. This is a “finish what you started” position: uniform implementation and lower compliance friction would do more for ease of business than a new framework.

For companies, the implication is that two firms in different states still face different GST and labour realities, weakening the single-market logic of past reforms.

The 8% Arithmetic Behind Viksit Bharat

Joshi frames the target: sustaining about 8% annual GDP growth is needed for India to become a developed economy by 2047. That makes land, FDI and compliance reforms supply-side conditions for capital formation, not administrative housekeeping. If those bottlenecks remain, India can still grow on services and consumption, but the manufacturing target and the high-growth path to 2047 become harder to defend.

What Businesses and States Should Watch as the Reform Push Takes Shape

For businesses and state policy teams, the reform agenda has specific markers rather than vague promises.

• Track state use of FY25 land-reform funds. States that digitise and clean land records first are likely to capture manufacturing investment as India pushes the 25% GDP share target for 2035.
• Watch the model BIT review. The updated treaty text promised in the FY26 Budget will determine whether net FDI can recover from $7.65 billion in FY26 toward the roughly $40 billion annual average seen between FY20 and FY22.
• Do not assume petroleum enters GST soon. Joshi lists it as unfinished, so logistics and fuel-heavy businesses should continue modelling fragmented state levies.
• Base labour compliance on the four codes as implemented state by state. Bhanumurthy’s “wait and assess” stance suggests no immediate second wave of central labour reform.
• Use the state divergence as a site-selection filter. Western and southern states’ better-functioning land administration is already an advantage for capital-intensive, land-dependent projects.