- 71% of MNCs consider India to be an attractive investment destination for their global expansion
- Majority (96%) of the respondents are overall positive about the Indian economy in the long run
- MNCs appreciate the impact of GST, the government’s digital push in various spheres, and transparency in taxation, amongst other reforms.
- 93% of the respondents feel that investment in Sustainable Development Goals (SDGs) and in climate change mitigation and adaptation is essential
New Delhi, 16 October 2022: 71% of Multi-National Companies (MNCs) consider India as an important destination for their global expansion. The optimism is driven by both the short-term prospects – a majority of MNCs feel that the Indian economy will perform significantly better in 3-5 years - and in the long term, with 96% of respondents being positive overall about India’s potential, according to a report released by EY-CII titled “Vision – Developed India: Opportunities and Expectations of MNCs”.
The report underscores that India has optimistic growth prospects for foreign investments with a potential to attract FDI flows of US$ 475 billion in just the next 5 years. FDI in India has seen a consistent rise in the last decade, with FY2021-22 receiving an FDI inflow of US$ 84.8 billion despite the impact of the pandemic and geo-political developments on investment sentiment.
Speaking on the launch of the report, Sudhir Kapadia, Partner, Tax & Regulatory Services, EY India, said “India recently emerged as the fifth-largest economy in the world, and it will continue to follow this growth trajectory in the coming years as well. It is seen as an emerging manufacturing hub in global value chains, a growing consumer market, and a global leader in the digital transformation of government and private sector alike. Our report, in collaboration with CII, captures the MNCs’ perspective on steps that government must take and policy measures that will power the next leap of economic development. Additionally, it also shares industry views on initiatives that will lead to the decarbonization of India’s economy to further boost its sustainability efforts.”
Speaking on the launch of the report, Soumitra Bhattacharya, Chairman, CII National Committee on MNCs said, “In the tumultuous backdrop of pressures on the global investment environment, recovery from the pandemic’s after-effects and geopolitical conflicts, it is reassuring to note that multinational investors continue to consider India as a stable partner as well as an attractive investment destination. The EY – CII report highlights the factors that are attracting investors and what more needs to be done to maintain this momentum. It is time for India to leverage its strengths to enhance its role in the global economy while meeting the aspirations of its large and mostly young population.”
The report also reveals that MNCs expect momentum on faster execution of infrastructure projects, ease of doing business, tax reforms and implementing trade agreements. Also, MNC investors in the sectors such as automotive, IT/Information Technology Enabled Services (ITES), chemicals and plastics, have been appreciative of the PLI scheme offered by the government that aims to encourage domestic manufacturing.
Ease of Doing Business (EoDB) as the top reform for MNCs
A large majority of businesses laud the government’s consistent efforts for enhancing the EoDB and over 60% feel that the business environment has improved for them in the last three years. In addition, in a rapidly changing geopolitical environment, India’s large and stable democracy and consistent reform measures are recognized by the MNCs. However, stringent policy intervention is needed to maintain the high momentum in growth and EoDB. According to the EY-CII report, the topmost demand is to implement a national single window for clearances; assure investors by improving tax certainty, and pay special attention to contract enforcement.
Providing a fillip to India’s efforts to sustainability goals
93% of the respondents feel that investment in Sustainable Development Goals (SDGs) and in climate change mitigation and adaptation is essential. Additionally, a large majority of the respondents (82%) agree investing in Sustainable Development Goals is essential.
Focus going forward
The report suggests that government should focus on implementing the infrastructure projects and project preparation timelines, especially for the Public-Private Partnership (PPP) projects. MNCs would like to see the development of competitive business clusters through the Development of Enterprise and Service Hubs (DESH) initiative.
Other key highlights of the EY-CII report
India’s growth trajectory
- The direction of India’s growth is being determined by the strong momentum in domestic consumption, services, digital economy, and infrastructure. The estimated real growth in consumption is the 3rd highest behind only the US and China while the fast-expanding digital economy is expected to reach US$ 1 trillion by 2025.
FTAs to boost trade
- The country’s thrust on structuring modern Free Trade Agreements (FTAs) to boost trade and create cross-border investment opportunities also finds favour with MNCs with 82% supporting the trade initiatives as they expect them to create new opportunities.
Policy push
- MNCs appreciate the impact of GST, the government’s digital push in various spheres, and transparency in taxation, amongst other reforms.
Demographic advantage and rising share of the services sector
- Robust demand, increasing investments and higher exports have made the services sector a significant contributor to India’s GDP growth.
- Notably, the services sector’s share in gross value added GVA is expected to grow from 55.3% in 2019-20 to 63.8% in 2030-31. It is, therefore, not surprising that an increasing number of people work in the services sector, an essential factor in a country like India where the working-age population is expected to peak in 2033 at 68.5%.
Potential in the manufacturing sector
- Besides the fact that India is among the fastest-growing large economies in the world, the confidence in India’s potential stems from strong consumption trends, digitization, and a growing services sector, along with the government’s strong focus on infrastructure and manufacturing.
- India’s flagship program “Make in India’’ completes its eighth anniversary this year and various reforms that have been undertaken to make India competitive have shown good results. In the future too, the manufacturing sector will continue creating larger opportunities for India.
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