EVEN now, when India is desperate to attract capital to fund its big balance-of-payments gap, the red carpet it rolls out is a little dusty. A year after rules were eased to permit foreign “single-brand” retailers to operate in India, Sweden’s IKEA is still waiting for the go-ahead to sell Nordic comfort food and furniture. India’s cabinet has yet to make its mind up about the flat-packed sort, it seems.The delay may become just another war story about foreign direct investment (FDI) in India. In the 1970s India chucked out IBM and Coca-Cola in a fit of nationalist pique. In the late 1990s the alchemists at Enron met their match in the subcontinent, losing billions on a power plant embroiled in a government spat. Recent acquisitions by foreigners, including those by Vodafone, a British mobile-telecoms firm, and Dai-ichi Sankyo, a Japanese drugs firm, have done poorly.Yet just how representative are these horror tales? The stock of FDI in India is now quite big—some $ 220 billion, or 12% of GDP, according to the Reserve Bank of India (RBI), the central bank. This includes everything from research centres in Bangalore to cement plants.The balance-of-payments data suggest that the overall return on equity for foreign investors is probably below 10% and slumped in the year to March 2012. An alternative measure is a recent survey by the RBI of 745 firms with significant foreign…

The Economist: Business