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Dynamics - May 2012 - India is attracting investors - EY - Global

Stepping up development transformations

India is attracting investors

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More than 60% of companies already present in India plan to increase their operations in the country.

Although India is still enjoying robust economic growth, concerns over governance, innovation, infrastructure and knowledge transfer are holding it back, says Rohan Malik, EY’s Advisory Markets Leader in India.

With India’s growth rate at 7%, foreign investors need little encouragement to move into such fertile territory.

India’s emerging middle class is acting as a magnet for overseas investment, and our latest Indian attractiveness survey revealed that foreign direct investment (FDI) projects increased by 25% in the first 11 months of 2011, when 864 projects created an estimated 216,739 jobs.

India attracts a variety of investment from all regions of the world, but more than half (52%) comes from the US, Germany, the UK and France. From Asia, Japanese and UAE companies represent 15% of the 864 projects recorded in the first 11 months of 2011.

Companies continue to be convinced by India’s growth and foresee their presence in the country as a positive long-term opportunity.

Our survey respondents reported:

  • More than 60% of companies already present in India plan to increase their operations in the country
  • 71% of business leaders are keen to invest in the Indian market in the short term
  • 47% percent of business leaders plan to invest within 6 months
  • 24% percent of business leaders plan to invest between 6 and 12 months

But India still faces challenges. The Government has set out plans to enable tax authorities to make retrospective claims on overseas corporate deals and it is moving to conform rising inflation and unemployment.

In addition, our survey exposed investors’ concerns over the current state of infrastructure, governance and transparency in the country.

The overall outlook, however, remains positive. If policy-makers succeed in quickly improving infrastructure, governance and transparency, there is little doubt that India will continue to remain attractive to foreign investors.

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Dynamics, December 2012

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