E&Y - India 2014 attractiveness survey: Enabling the prospects - January 2014
We are happy to present the key findings of our third India attractiveness survey, which show that, despite recent headwinds, India remains an attractive destination for foreign direct investment (FDI), alongside the US, China, the UK and Brazil, on account of its solid domestic market, educated workforce and competitive labor costs.
India features prominently in many of our respondents’ plans for the future. In the short term, we see investors consolidating their presence in India. 2014 will be decisive for new players as the election results come in and expectations are formed in terms of sustaining the pace of
reform and deregulation.
Investors are considering India for both their services and manufacturing supply chain, but for investments to materialize, the environment must be more enabling and measures on other competitive issues, including currency stability and ease of doing business, must be implemented. The consumer products, industrials, technology, media and telecom (TMT) and life-sciences sectors, are set to drive India’s growth over the next two years.
The long-term outlook for India is positive, with investors expecting the country to be among the world’s top three growth economies by 2020. New business partners, particularly from the Middle East and Southeast Asia, are increasing investment into India – ramping up efforts to
tap into an underlying potential that the US, Europe and Japan have long seen.
India continues to draw a healthy share of the capital allocated to emerging markets.
Among respondents that had an emerging market strategy, nearly a fifth said that India accounts for more than 20% of their total capital allocated for the developing world. While China continues to be viewed as its main competitor for FDI, destinations such as Indonesia, the Philippines and Vietnam form an emerging wave of competitors.
Our 2014 India attractiveness survey presents a more positive view than that taken by many economic commentators in recent months. However, the country needs to enhance its business environment by reducing corruption and strengthening the rule of law, develop infrastructure, boost manufacturing, simplify its taxation system, ease FDI regulations and increase awareness about its emerging cities.