Highlighting a continued upward foreign direct investment trend in India, a Deloitte survey concluded that global investors are confident about investing in India. The reforms by the government of India to improve ease of doing business are encouraging however, lack of awareness of policy improvements may be a challenge.
A large proportion of international business leaders remain confident in India’s short and long-term growth prospects, making India an attractive destination for foreign direct investments, according to a survey by Deloitte.
Almost 44% of the business leaders surveyed are planning additional or first-time investments in India, and nearly two-thirds of first-time investments will be made within the next two years, the survey titled ‘India’s FDI Opportunity’ said.
India has scored very well among emerging markets in skilled workforce and prospects for economic growth, and business perceptions are better in the US and UK compared with Singapore and Japan, the survey noted.
The consultancy firm surveyed a total of 1,200 business leaders from multinational companies across the US, EK, Japan and Singapore during the second wave of COVID-19.
Policies to improve the ease of doing business has encouraged global investors. However, lack of awareness of relevant policy improvements like digitisation of customs clearance and production linked incentives (PLI) schemes for manufacturers can lead to losing out on investments.
Around 16% of business leaders in Japan and 9% in Singapore were not aware of such initiatives, the survey said.
“India was perceived as a more challenging environment to do business compared with China and Vietnam. Roughly 75% said they were more willing to invest in India after being made aware of existing government programmes, incentives and reforms,” quoted the survey.
India will need $8 trillion of gross capital formation (new greenfield assets) to become a $5-trillion economy by financial year 2026-27. Based on trends, India will need at least $400 billion, cumulatively, over six years, in FDI, Deloitte said.
Though India was rated higher on economic growth, skilled workforce, and is perceived as politically and economically stable, it scored lower on institutional stability that is regulatory clarity and efficient judicial redress and mechanisms. Inadequate infrastructure was another negative factor cited by existing and potential investors.SURVEY KEY FINDINGS
Other key findings from the survey:
Utilities (energy infrastructure) is likely to lead the way among sectors that will see new investments by 57%, followed by financial services at 49% and healthcare at 48%.
> India can target attracting greater FDI into seven capital-intensive sectors – textile, food processing, electronic goods, pharmaceuticals, vehicles and parts, chemicals and API, and capital goods.
> More business leaders, especially in Japan, are making investments in India for access to the domestic market rather than using India as a springboard for exports.
> Though India was rated higher on economic growth, skilled workforce, and is perceived as politically and economically stable, it scored lower on institutional stability that is regulatory clarity and efficient judicial redress and mechanisms. Inadequate infrastructure was another negative factor cited by existing and potential investors.
The survey predated the government’s recent decision to rectify the long-running retrospective taxation issue with an amendment in the tax law, a significant boost for investor confidence.
https://cfo.economictimes.indiatimes.com/news/india-remains-attractive-destination-for-foreign-direct-investments-deloitte-survey/86194769
