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India Emerging as the top Investment Destination

25 Oct 2020

Economic crises are not recent. Their history goes back to mid-1637 when the ‘Tulip and Bulb Craze’ took place. It was followed by the ‘South Sea Bubble’ crisis in the 1700s, the Florida Real Estate Craze, and, of course, the more recent ones of the Great Depression (1929), the Crash of 1987, the Asian Crisis (1997), the Dotcom Crash (2001), and the Global Financial Crisis (2007).

While the repercussions of these were felt over years, none of them economic crises bear resemblance to the one we face right now. COVID-19 resulted in complete or partial shutdown of socio-economic activities across the world, threatening both lives and livelihoods. In a scenario where the economic crisis is not market induced, it is imperative to recalibrate the way countries do business.

The crisis has presented a growing need to diversify the economic activities, divide the shock, and look beyond one nation for their business needs. India, with its attractive market, skilled workforce, policy reforms, among others, has emerged as a favoured destination for the world.

To gauge the market sentiment amongst the Indian as well as non-Indian MNCs, the Confederation of Indian Industry (CII), in association with EY, conducted a Foreign Direct Investment (FDI) survey on the theme, ‘How can India step up its game?”  

The survey was conducted to assess India’s competitiveness in terms of the high and low performing parameters; analysing whether India is likely to be the “+1” jurisdiction for those seeking to relocate investments or making fresh investments; and giving constructive suggestions to policymakers for the policy push required to attract more investments in India.

According to the survey, 82 per cent of the respondents are planning to invest in the next two-three years, with 30 per cent of them to invest more than USD 500 million. India is the top choice to invest in the next three years for 34 per cent of the respondents. 

The respondents have pinned down market potential (23%), skilled workforce (18%), and political stability (12%) as the top three reasons to make India their favored destination. Other key factors that contribute to the attractiveness of India as an investment destination include cheap labor availability, policy reforms, and the availability of raw materials.

Recent reforms in the country such as corporate tax cuts, Ease of Doing Business measures, simplification of labour laws, FDI reforms, and focus on human capital have emerged as the top drivers for fresh investments among Indian and Non-Indian HQ companies. 

The respondent also pointed out the key areas where they want the government to bring some changes. 17 per cent of the respondents want the government to focus on infrastructure, followed by faster clearances (13%), labour laws & availability (10%), R&D and Innovation (9%), tax reforms (8%), among others. Among key trade policy areas, the respondents want the government to focus on faster turn-around time, improved cargo handling facilities, and trade facilitation measures. 

Around 50 per cent also see India amongst the top three growing economies and leading manufacturing destinations of the world. 

The survey presents a favourable investment climate for India. It could be seen in the record FDI in April-August 2020. The total inflow of FDI in the first five months of FY21 was USD 35.73 billion which is 13% higher as compared to the first five months of 2019-20. FDI equity inflow received during the same period was USD 27.10 billion which is 16% more compared to the first five months of the previous financial year. 

With market opening up coupled with policy measures, India is on the path of recovery, and in the post-COVID world, it is destined to be the hub for economic activities. 

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