Prime Minister Narendra Modi’s victory in 2014 election had marked a “turning point” in investor sentiment about India, but his government has not lived up to expectations, according to the U.S State Department’s annual assessment of investment climates in foreign countries. The assessment, however, says foreign companies have “immense opportunities” in India though success requires “a long-term planning horizon and a state-by-state strategy.”

The State Department’s annual Investment Climate Statements are prepared by U.S embassies, and are meant to provide information and assessments on foreign markets to U.S companies.

Though the section on India is appreciative of the progress made by the Modi government in streamlining bureaucratic processes and opening up more sectors to FDI, it underscores many concerns from the U.S perspective. The report says the Modi government has not matched its rhetoric on reforms in actions, and even thinks the 7.5 per cent growth rate “may be overstated.”

The report notes that “the monetary stewardship of Raghuram Rajan, the respected Governor General of the Reserve Bank of India, further boosted investor sentiment.”

“…the government has been slow to propose other economic reforms that would match its rhetoric,” the report said. “Ostensibly, India is one of the fastest growing countries in the world, but this depressed investor sentiment suggests the approximately 7.5% growth rate may be overstated.”

That the Modi government has been high on rhetoric and slow in action has been heard increasingly in the U.S capital. In May, in a stinging critique, Bob Corker, the Republican chairman of the Senate Committee on Foreign Relations had said: “In the case of U.S. – India relations, the hopeful rhetoric has far exceeded actual tangible achievements.”

In June, addressing a gathering of U.S. business leaders at the U.S. India Business Council, Mr. Modi had sought to expand the notion of reforms. “I have said several times that my aim is to reform to transform. For me, reforms are those policies that transform the lives of ordinary citizens. In the last two years, we have taken a comprehensive package of reforms, which go beyond more economic reforms,” Mr. Modi had said.

But that may not be appealing to U.S. business interests. The report says the Modi government’s slow progress has “resulted in many investors retreating slightly from their once forward-leaning support of the BJP-led government.”

The statements survey topics such as openness to investment, legal and regulatory systems, dispute resolution, intellectual property rights, transparency, performance requirements, state-owned enterprises, responsible business conduct, and corruption.

“The Modi government has prioritized economic growth to fulfill its electoral promises and to address the Indian electorate’s high expectations,” the report said but counted among its failures the stuck pieces of legislation on land acquisition and GST. The report also notes that political disturbances in Punjab and Gujarat – the Patidar agitation – damaged investor sentiment in these states.

“The government has continued to relax FDI restrictions in a wide variety of sectors as part of the government’s efforts to further open the economy. Most recently, the government approved up to 100 percent foreign investment in civil aviation, defense, certain sectors of e-commerce, and the pharmaceutical sector. Additionally, the government eased requirements for some retailers to source “state-of-art” technology in India could be particularly beneficial to high-tech companies such as Apple, although underlying supply chain constraints remain,” the report said, but noted its continuing opposition to FDI in multi-brand retail.

“There are few quick fixes to the structural impediments, poor regulatory environment, tax and policy uncertainty, infrastructure bottlenecks, localization requirements, restrictions in many services sectors, and massive shortages of electricity that hinder India’s economic growth potential,” it said.