Foreign direct investment from the U.S.

When Indian Prime Minister Narendra Modi arrives for his first official U.S. visit on Friday, a top goal will be resuscitating investment interest in his country's sputtering economy.

Not too long ago, investors and executives had hoped the South Asian nation would follow China to become an Asian economic powerhouse. But many companies drawn by that potential ended up tangled in a knot of challenges.

Overstretched infrastructure, confusing and sometimes contradictory regulations, foreign-investment restrictions and tax authorities that sometimes seem to target big foreign firms convinced some firms India wasn't worth the trouble.

Foreign direct investment from the U.S. into India has shrunk in recent years—to around $800 million in the year ended March 31, from a peak of $1.9 billion four years earlier—as India's economic growth has slowed and executives have been disappointed by New Delhi's failure to modernize the country's infrastructure and pass key economic policy changes.

Mr. Modi was elected this spring after pledging to get the economy moving again. He has taken steps to cut red tape and open the economy wider to outside participation, but hasn't embarked on the kind of sweeping liberalization some businesses had hoped to see.

The Indian leader's U.S. trip will be an attempt to reassure American executives that he is serious about dismantling many of the country's long-standing barriers to doing business. The question is: Will that be enough?

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