This survey explains why foreign investors are still bullish on India

New Delhi: Foreign investors plan to expand presence in India and look forward to easier business climate as well as a sustained pace of reforms following general elections this year, says a survey.

More than half (53.2 percent) the respondents are considering increasing presence in India and of them, 57.9 percent are planning to expand operations, it said.

The long-term outlook for India is also positive, with investors expecting the country to be among the world’s top three growth economies, and among top three manufacturing destination by 2020.

[caption id=“attachment_1305501” align=“alignleft” width=“380”]  Representational Image. Reuters[/caption]

The ‘India Attractiveness Survey 2014’ by consultancy EY was conducted among over 500 global executives of companies with international presence in North America, Europe, Asia and West Asia.

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According to the survey, labour costs are India’s most attractive asset but infrastructure, business environment, (Foreign Direct Investment) regulations and taxation policy are the main challenges.

“In the short-term, we would see investors consolidating their existing presence in India,” said Rajiv Memani, Country Managing Partner at EY 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 reforms and deregulation,” he added.

That apart, 61.6 percent of respondents do not have any short-term or overseas expansion plans.

“Investors are considering India for both their services and manufacturing supply chain, but for investments to materialise the environment must be more enabling and measures on other competitive issues, including currency stability and ease of doing business must be implemented,” Memani said.

The survey noted that 70.8 percent of the respondents found China to remain India’s main competitor for FDI.

However, 8.8 percent respondents indicated that new destinations such as Indonesia, Philippines and Vietnam are also emerging as competitors.

Of the respondents who have an emerging markets strategy, nearly a fifth said that India accounts for more than 20 percent of their total capital allocated for the developing world.

However, these investment plans vary across sectors. Technology, media and telecoms, infrastructure and financial services companies plan to invest smaller amounts than business services investors.

Overall, in 2013, India received 310 projects in the first nine months, a 46 percent decline from year-ago period mainly on account of volatile rupee, infrastructure bottlenecks and lack of reforms.

PTI