FDI flows into India strong despite low GDP numbers: Credit Suisse
11 Dec 2013
India continues to be the most attractive investment destination for global businesses despite its recent slowdown and changing policy perceptions, a report by broking major Credit Suisse has pointed out.
The finding dispels arguments that given the slowing GDP growth and widening gaps in trade and domestic finances, India will not be able to attract enough foreign direct investment (FDI), the report said citing recent data.
India's recent macroeconomic performance has left much to be desired, with GDP growth slumping to a 10-year low of 4.4 per cent in the June quarter of 2013, as the current account deficit climbed to nearly 5 per cent of GDP in 2012-13, the report pointed out.
"Many have argued that an associated de-rating of the country's long-term growth prospects will discourage inward FDI and encourage outward investment at a time when India needs it most - both to build infrastructure and fund the external shortfall," the report said.
The hard numbers don't support this hypothesis. On the contrary, data suggests the growth in inward FDI (as a share of GDP) has stabilised recently.
However, outward investments have also been growing, leaving net FDI ratio close to its highest ever level. This has somewhat levelled off in recent times suggesting that India has actually witnessed a modest improvement in its net FDI position during the first three quarters of 2013.
"These developments could of course just reflect time lags. Alternatively, domestic and foreign companies may be taking the view that the Indian economy, although structurally challenged, still offers better long-term opportunities than much of the rest of the world," the report noted.
