India's highly anticipated national budget, released in February, dampened the interest of foreign investors, according to the Wall Street Journal.
O'Neill said while nothing was hugely amiss with the budget, it lacked a "wow factor" that the Indian and international public had foreseen. Investors had hoped for something in the budget that would signal a friendlier business environment, but didn't see any huge changes.
India ranked 142 among 189 countries for the ease of doing business, according to the World Bank Group's "Doing Business" rankings, benchmarked to June 2014. By comparison, China stood more than 50 points ahead at number 90.
Read MoreHopes for a new, more open India aren't dead yet
"It is definitely difficult to start and run a business in India," said Anubhav Gupta, senior program officer at Asia Society Policy Institute. "Obtaining land rights, dealing with construction permits (where India ranks 184 in the World Bank rankings), enforcing contracts and taxation are all big issues."
Gupta praised the "Make in India" campaign is, but said it's hobbled by a lack of infrastructure and requires more substantive policy reforms behind it. Power failures are another major issue that India needs to tackle in order to boast a robust manufacturing sector, he said.
"India would love to be the next China in terms of manufacturing, but other than having a similar population, I cannot think of any other realistic reason how this could happen," O'Neill said. "It needs to progress so much to be in the same league as China."