India has retained its position as the second most-preferred global location for foreign investment in 2008 and will continue to do so till 2010, lagging only behind China, the United Nations Conference on Trade and Development (Unctad) has said in World Investment Report 2008.
Foreign direct investment (FDI) inflows into the country will continue to show the robustness seen in the past couple of years despite the global financial crisis that many feel will impact economies across the world.
The report also mentions a survey by the Japan Bank for International Cooperation (JBIC), in which Japanese transnational manufacturing companies have rated India higher than China for establishing business operations.
“Going by my personal interactions with industry, it could be said that the Indian government’s FDI target of $35 billion for 2008-09 can be achieved. However, we may not see any big inflows into the country. Inflows may be low for sectors like infrastructure, but other sectors are likely to see enough growth,” said Unctad’s policy expert Premila Nazareth Satyanand, who released the report in India today.
However, other experts believe that the global liquidity crunch may impact FDI inflows into the country. “It is possible that the projected FDI inflows may not happen in 2009-09 and get deferred to the next fiscal,” said Partha Mukhopadhyay of the Centre for Policy Research.
The report also points that India has improved its ranking in the inward FDI performance index (which measures the flow of foreign investment into a country relative to its GDP) from 110 in 2006 to 106 in 2007, which is below that of Hong Kong, Indonesia and even Guatemala, but above Germany and Taiwan.
Within Asia, India received the fourth largest amount of FDI inflows in 2007 (after China, Hong Kong and Singapore), which stood at $22.95 billion, translating into a growth of 16.73 per cent over $ 19.66 billion in 2006. “Significantly, India is bridging the gap with Singapore as a destination for FDI inflows,” added Satyanand.
The growth has been attributed to further opening up of telecommunications, single-brand retail, as well as increasing cross-border merger and acquisitions. More than a quarter of 300 international retailers told Unctad that they have either opened their first store in India during 2007 or are planning to do so in the near future.
India was also recognised as the fourth-largest source of FDI in Asia, as Indian companies invested $13.64 billion abroad in 2007, as against $ 12.84 billion in the previous year, an increase of 6.23 per cent.