"Given the tight profit margins that a lot of these companies are running to, given the cost pressure in terms of maintaining pricing at a low level to satisfy local needs, it is a challenging area to try to maintain the business and make it successful within the constraints of an economy like India," Bailur said.
Rather than making products in India for export - which requires navigating not just poor infrastructure but also complex foreign exchange rules - Bailur said may be easier for companies to first make products in India for the local market.
"Whilst I think the Make in India campaign will work in the long term, it is something that is a positive thing for the country, I think the initial step really should be a 'make for India,'" he said. "There's a large domestic market with increasingly affluent consumers."
Some companies that have made the strategic decision to put money into India have received a mixed reception for their efforts.
Rio Tinto, for one, has "seen the 'good' and the 'needs to improve' category," Alan Davies, the company's CEO for diamonds and minerals, told CNBC.
The company has a diamond cutting and polishing partnership in Gujarat, employing around 250,000 people to handle diamonds from its Argyle diamond mines in Australia, which are generally exported from India for sale globally.
Rio Tinto has had some slow-moving success on its efforts to bring the Bunder diamond project in Madhya Pradesh - a decade-old find - to production. Davies told CNBC that the government has provided good support and the company was in the final permitting process.
He hopes to market the diamonds to Indians as an additional gift along with the traditional choice of gold when giving gifts for special occasions such as weddings.
But it's a different story with Rio Tinto's Orissa iron-ore joint venture in the Odisha province, with the company spending around two decades trying to get project approvals.
"We've had some examples where the decision-making has been extremely slow," Davies said.
It isn't clear if efforts to eliminate many business headaches will succeed, despite Modi's best efforts.
Amid a tough September for the reform agenda, Finance Minister Arun Jaitley announced that the government had abandoned a plan to call a special session of parliament to secure approval for the implementation of a goods and services tax (GST) because it lacked political support.
The GST has broad support from businesses, in hope it will streamline India's tax administration by replacing a myriad of complex taxes charged by the 29 states with a uniform nationwide levy.
Modi has also faced fierce protests against his efforts to overhaul stringent labor laws to give companies more flexibility to hire and fire. And he was defeated on a controversial land acquisition bill that would make it easier for businesses to buy farm land for infrastructure and industrial projects.
But there are hopes the FDI reforms announced in November and other small steps will produce results.
Success stories, such as Xiaomi's, are likely to help.
"It has been a great step for us," Xiaomi's Jain said. "Most of us are confident that over the next few years, India will become a manufacturing hub and many multinational companies, international companies should take advantage of the all the benefits the government is providing."
- Ansuya Harjani contributed to this report