The government may have saved its political skin by putting FDI in retail on hold, but it has added to the sense of gloom that's engulfing India Inc. For the past several weeks, there's been a depressing drumbeat of stories of Indian businessmen choosing the relatively lowgrowth, high-stability option of investing abroad over the uncertainty of launching new ventures at home.

Says the India head of a fabled global investment bank, "For me, there's no slowdown. My plate's full with mandates from Indian companies looking at acquisitions abroad."

But it's not just about the flight of investments anymore. Several Indian billionaires say they are frustrated enough to want to shift base overseas and run their increasingly transnational business empires from cities like London and Singapore . "I'm sick and tired of what's happening here. I don't want to live in this country anymore," said one of India's biggest barons.

The reasons are mainly two-fold: the policy paralysis brought on by a politically weak and scam-struck government, compounded by obstructionist competitive politics; and the climate of fear that has spread because of the raids on and arrests of businessmen. They have a third, more specific grouse (not that it's new): the time and hassle it takes to get environmental clearance and acquire land.

Bulge-bracket businessmen — from telecom and textiles to aviation and steel to real estate and minerals — are talking ‘Quit India', but obviously not in public.

They may be exaggerating, but for the first time since the dawn of liberalization 20 years ago, the India story seems to be dimming compared to the welcoming lights of foreign shores. As RPG Enterprises chairman Harsh Goenka quips, "We are looking for the red carpet, not for red tape."

The foreign lure is emerging on three fronts:

•Indians buying personal assets overseas

• A significant jump in outward remittances

• Company owners focusing on generating more offshore currency through larger global investments in a bid to hedge themselves against India.

The latest industrial production and GDP figures are cautionary indicators against India complacently comparing itself with the dismal economic situation in the US and the Eurozone. According to a just-released survey by industry body CII, CEOs are anything but bullish about their 2012 investment plans.

Homing in on London

In the past year, many high-profile Indians have bought homes in London's toniest neighborhoods. Bharti's Sunil Mittal , who purchased a home in Grosvenor Square a few months ago, is spending more time working out of there to keep up with the firm's global needs. The Munjals are said to have bought two homes in Kensington. DLF's K PSingh, Essar's Ravi Ruia and Sahara's Subrata Roy often live and work out of the city that once ruled India. Real estate circles in London often refer to the Berkeley and Grosvenor Square areas as upmarket ‘Indian ghettos'.

Says a former top banker based in London, "Cities like London and Singapore are safe havens and the rule of law is clear. There is a sense of individual security and privacy."

Ajay Piramal of Piramal Lifesciences has also bought himself a sprawling home in London, although he isn't shifting base. He points to India's problems: "You don't know what regulation is going to hit. Sometimes it is not even rational. Very old cases are being pulled out. This doesn't give you a sense of certainty."

Says Sunil Mittal, "There's a sense that the bureaucracy has stopped taking decisions as they fear that action might be taken against them in future even for honest mistakes."

According to a private banker, it's not just the very rich who are now purchasing assets in the west. "Property deals of $10 million are now happening routinely. Beverly Hills (in Los Angeles ) is one place where promoters of listed midcap firms are keenly investing," she says.

In the past two years, Indians have significantly increased the amounts they spend on foreign property. Outward remittances topped the billion-dollar mark for the first time in fiscal year 2010-11. "When one person can legally take $200,000 a year, a family can easily buy a million-dollar home," says a senior foreign bank executive.

Hedging against the India story

Apart from personal property deals, India Inc clearly wants to do business at a global level. "We look overseas because it's a question of ease of doing business. We are wondering how we can get 50% of our revenues from overseas in the next few years. We are simply fed up of red tapism and the harassment involved," says Goenka.

"Of course we are hedging against the India bets by investing globally. If India were so attractive right now, why would people look beyond?" asks Piramal, who is looking to deploy his cash stash of over $2 billion. Recently, the CEO of a large Indian MNC in the country told his managers that all India investments were being brought to a halt.

Kumar Mangalam Birla, whose firm Hindalco gets over 30% of its business from Europe, has also said that for now, he's rather look outside. In a recent interview with ET Now, he said, "I think that the environment is not so conducive to growth; there is a lot of policy back-and-forth that's happening unfortunately…One would want to wait for things to get better. I think it's a good time to start looking overseas."

Godrej Group chairman Adi Godrej is clear that India needs to get its act right, "especially in sectors like infrastructure and mining, where government is important and we have been more adversely affected".

The data too just keeps getting more depressing. The target of 8% growth seems elusive, with GDP growth having slowed to 6.9% in the July-September quarter.

CII points out that stalled environment clearances and land issues have cast a pall over investor confidence. It also cites quality of governance, slow pace of decision-making, high transaction costs and corruption as reasons for the pessimism about investing in India.

Crisis of confidence

Animal spirits are clearly at a low right now, acknowledges ICICI Bank chairman KV Kamath. "Negativity as a whole pushes you down," he says, adding that he has seen such trends every time the country has been hit by a slowdown in the last 40 years.

A banker says that of his top 100 clients, 75 are sulking and say they have no incentive to offer to potential investors. It's a far cry from the ebullient Indian promoter, hungry to buy assets and expand, that one had got used to.

Fear factor

The Group of 14 eminent citizens (drawn mostly from business), in their letters to the nation's leadership, have said India Inc is tired of being harassed by a system that expects them to pay bribes. Bureaucracy on one hand and random investigations on the other have had a depressing effect on corporates. "Why put CEOs in jail," asks Rahul Bajaj , the outspoken chairman of the Bajaj Group. The arrests in the recent 2G scam have had India Inc on the run for months, especially since the bail pleas of promoters and senior executives were repeatedly rejected. "Till they are convicted, why are they in jail? If you want them for interrogation, take away their passport. The only argument CBI gives is that they will tamper with evidence but that's no logic."

Lost decade?

Ironically, India is still growing faster than most of the world. The global slowdown offered the Indian government an excellent opportunity to woo investors. Instead, points out corporate lawyer Harish Salve, "Not only have we scared away foreign investors, we have scared away even Indian investors. They are worried about investing in their own country."

"Decision making has come to a standstill," laments HDFC chairman Deepak Parekh . "Look at power sector reforms where meetings have been indefinitely postponed. We have lent massive sums of money to the sector but they have issues of land and government approvals."

Is India on the verge of losing what began as a Dream Decade? "It is. Because of lack of decisions and drift," says Piramal. Adds Godrej, "We are surely embarrassing ourselves…Some of the governance issues being exposed are hurting us."

You don't know what regulation is going to hit. Sometimes it is not even rational. Very old cases are being pulled out. This doesn't give you a sense of certainty Ajay Piramal

There is a lot of policy back- and-forth that's happening... One would want to wait for things to get better. I think it's a good time to start looking overseas Kumar Birla