The FINANCIAL — India has been ranked the most attractive investment destination in the world for the next three years, according to Ready, set, grow: EY’s attractiveness survey, India 2015. Thirty-two percent of business leaders from global corporations who were polled for the survey said India is the most attractive investment destination, while UK-based investors are more upbeat, with 36% ranking India as the top investment destination, followed by China and Brazil. Sixty percent of UK-based investors rank the country among the top three investment destinations in the next three years.
The survey includes the views of more than 500 decision-makers from multinational organizations across sectors, including over 50 business leaders from UK-based companies. The report also presents a detailed overview of FDI inflows and projects, covering sectors, emerging FDI destinations and countries of origin.
Compared to their global counterparts, UK investors are more positive about India’s ongoing tax and regulatory reforms, with 61% finding it attractive, as compared to 54% of global investors. India’s labor cost and skills, its domestic market, and macroeconomic stability were ranked among the country’s most attractive features by the UK-based investors. Overall, the survey shows that India has made significant gains over last year in the attractiveness of attributes such as ease of doing business and FDI policy reforms. Rajiv Memani, EY Chairman of the Global Emerging Markets Committee and India Regional Managing Partner, says:
“The survey findings are a testament to India’s growing appeal with the global investment community. Over the last year, the improvements in India’s macroeconomic indicators, accompanied with the ongoing efforts to revitalize growth, have offered new hope to investors. It is an encouraging start and we need to build upon it further.”
Reforms drive FDI inflows
Among specific reforms expected to drive growth, 92% of the UK investors said that investment in infrastructure and the 100 Smart Cities project would be significant. Proposed corporate tax reduction from 30% to 25% was considered significant by 88% of respondents, while 86% indicated that financial inclusion, such as Digital India and implementation of goods and services tax, would be significant. Reduction of royalties and fees for technical services and legislation on land acquisition were also mentioned by investors as important for attracting FDI.
Investment from UK rebounds
Robust investor confidence is also reflected in FDI inflows, with EY’s 2015 India attractiveness survey report citing a sharp turnaround. The report highlights data from fDi Markets indicating that in the first six months of 2015, India has become the top FDI destination, with US$30.8b of FDI inflows, moving up from fifth position in the corresponding period last year.
Projects from the UK rebounded strongly in 1H15, with FDI inflows of US$3.6b, registering an increase of 615% compared to the same period last year. The sharp increase in UK FDI during the first six months of the year has reversed the decline during calendar year 2014, when FDI had dipped to US$1b from US$2b in 2013. Energy, metals and mining, aerospace and defense, and cleantech witnessed a significant upsurge in investment, while technology, media and telecommunications (TMT) and business services also saw the growth momentum.
Manufacturing leads investment plans
Close to 60% of UK-based respondents said they have plans to invest in India over the next year. Forty-six percent of UK investors stated that the manufacturing-related sectors will attract the most foreign investments in India in the next two years, followed by infrastructure and services sectors. The increased interest in investing in manufacturing is also reflected in global FDI inflows, which showed a 62% increase in calendar year 2014 compared to the previous year, ahead of the 31% growth in the services sector FDI. In the same period, the share of manufacturing in total FDI increased from 37% to 45%. The trend continues in the first six months of 2015, with manufacturing registering a 221% increase in FDI inflows.
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