India attractiveness survey 2014

Enabling the prospects

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Our 2014 India attractiveness survey finds that India remains one of the top global destinations for foreign investment, despite recent headwinds. The main drivers are its solid domestic market, an educated workforce and competitive labor.

India features prominently in many of our respondents’ plans for the future. More than half of international business leaders surveyed plan to enter or expand their existing operations in the country over the next year. Nearly a fifth of respondents with an emerging market strategy said that India accounts for more than 20% of total capital allocated for the developing world. The infrastructure, consumer products, industrials, technology, media and telecom (TMT), and life-sciences sectors are set to drive India’s growth over the next two years.

Investors are considering India for both their services and manufacturing supply chain. With the services sector forming the backbone of India’s economy, the Indian Government is placing more weight on strengthening the country’s manufacturing ecosystem. Our research shows that global investors are starting to recognize relevant efforts, with the vast majority expecting India to be a leading manufacturing hub by 2020. But for that to happen, the environment must be more enabling and measures on other competitive issues, including currency stability and ease of doing business, must be implemented.


Key features of India’s attractiveness

1 In the top five click here to zoom

India was the fourth-largest recipient of FDI in terms of projects started in 2012, and in terms of value, it accounted for 5.5% of global FDI. Although the number of jobs declined slightly in 2012 (due to a drop in industrial projects) India still accounts for 9.4% of jobs created by FDI around the world.


In the top five

EY - In the top five

Source: fDi Intelligence.

2 Increased interest from the Middle East and Southeast Asia click here to zoom

Investors across the world recognize India’s FDI potential. Between 2007 and 2012, the US invested the most in India, with 30.2% of projects, followed by Japan with 10.4%. Seven of the top 10 investors in India during 2007-12 were from Western Europe, led by the UK and followed by Germany and France. India's pool of business partners is growing, with a striking 123.3% rise in the number of projects from the Middle East in 2012, mostly in financial services. Southeast Asian countries are also expanding their investment in the country, with projects mainly originating from Singapore, Malaysia and Thailand.


Increased interest from the Middle East and Southeast Asia

EY - Increased interest from the Middle East and Southeast Asia

Source: fDi Intelligence.

3 Top FDI destinations click here to zoom

Actual FDI performance and our survey results both show that metropolitan cities, such as Mumbai, Bengaluru, the National Capital Region (NCR), Chennai and Pune, remain key attractions. On the other hand, there is a significant awareness gap about tier-II and tier-III Indian cities, which also offer opportunities for investment. Forty-three percent of respondents could not think of any city other than the main metropolitan areas. Among those who responded, Ahmedabad was the preferred choice in emerging cities, followed by Jaipur, Chandigarh, Coimbatore and Surat.


Top FDI destinations

EY - Metropolitan attraction

Source: fDi Intelligence; EY's 2014 India attractiveness survey (total respondents 502).
*NCR for reality and New Delhi for perception.

4 Opportunities rising in infrastructure click here to zoom

TMT is the most attractive sector to investors, followed by industrial and business services. While TMT will remain the leading sector, investors expect the infrastructure and industrial sectors to become more attractive in the next two years.


Opportunities rising in infrastructure

EY - Opportunities rising in infrastructure

Source: fDi Intelligence; EY's 2014 India attractiveness survey (total respondents 502).

5 New wave of competition click here to zoom

China remains India’s main competitor for FDI as both economies are strongly competing to obtain a greater share of world trade and investment. Alongside, new destinations such as Indonesia, the Philippines and Vietnam, are also emerging as competitors. The Philippines is competing with India in the outsourcing industry, whereas Indonesia and Vietnam are also gaining significance due to their huge domestic market.


New wave of competition

EY - New wave of competition

Source: EY's 2014 India attractiveness survey (total respondents: 502).

6 An attractive market with a challenging business environment click here to zoom

India’s appeal lies in its competitive labor costs, lucrative domestic market, and its skilled workforce. Foreign investors also applaud its strong management and business education system, as well as its improving telecommunications infrastructure. However, the country’s weaknesses are its under-developed infrastructure and a restrictive operative environment.


An attractive market with a challenging business environment

EY - An attractive market with a challenging business environment

Source: EY's 2014 India attractiveness survey (total respondents 502).

7 High expectations for 2020 click here to zoom

Respondents to our 2014 survey expect India to be among the top three economies of the world in 2020, particularly for economic growth and manufacturing. This is consistent with our 2012 results. Also, this year only 5.2% of respondents expect India to be surpassed by competition from more dynamic countries, compared with 11% last year. Strengths such as a burgeoning middle class, growing domestic consumption levels and a skilled workforce are helping India to strengthen its position in the global marketplace.


High expectations for 2020

EY - Six steps to improvement

Source: EY's 2014 India attractiveness survey (total respondents: 502).

8 Six steps to improvement click here to zoom

In order to realize its FDI potential, India needs to improve its operating environment and develop infrastructure. Other priorities should include boosting production, improving the taxation system, easing FDI regulations and increasing awareness about emerging cities.


Six steps to improvement

EY - High expectations for 2020

Source: EY's 2014 India attractiveness survey (total respondents: 502).

India's dynamic standing in the global marketplace is set to strengthen further in the years to come. Our survey respondents believe that India will continue to enjoy solid growth and develop particular strengths in manufacturing and infrastructure.