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New Delhi: India has emerged from sixth to third most attractive FDI location globally (displacing Mexico), closing the gap with the US, which remained the second most attractive FDI location after China.
The 2004 A T Kearney Foreign Direct Investment Confidence Index, an annual survey of executives from the world's largest companies, conducted by the global management consultancy, A T Kearney, says "China and India rival one another in aggressively challenging the United States as the world's most favoured destinations for foreign direct investment."
The survey says that more global executives are likely to invest in China and India than at any time since 1998. As China and India forge their leading positions in the global economy, the United States and the rest of the world will face severe competitive pressures from these two dynamic and rapidly evolving economies.
Highlights of the survey -
China and India dominate the top two positions for most positive investor outlook, likely first-time investments, and most preferred offshore investment locations for business processing functions and IT services.
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China and India cited by CEOs as the most attractive FDI destinations in the short-term (next three years) and well into the future for medium-term attractiveness (10 years out).
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While China is viewed as the world's leading manufacturer and fastest-growing consumer market, India leads as the world's business process and IT services provider, with longer-term market potential.
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Investors cite India's highly educated workforce, management talent, rule of law, transparency, cultural affinity, and regulatory environment as more favourable than China's.
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China ranks as the number one FDI location across all major sector investors including financial and non-financial services, manufacturing, primary, telecom and utility and wholesale and retail.
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India displaces the US to become the second most attractive FDI location among manufacturing investors, while the US falls to third place.
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Telecom and utility investors upgraded China from fourth to first and India from fifth to second most attractive FDI destination, while dropping the US from first to fourth places.
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More executives this year expect to achieve profitability targets in the big emerging markets - China, India, Brazil, Mexico and Poland. According to Paul Laudicina, A T Kearney's vice president and managing director of the firm's Global Business Policy Council, which conducts the study, "With dampened global risk perceptions, investors who have not overhauled their strategic planning functions, and put in place rigorous risk identification and management systems will be ill-prepared to absorb the next inevitable shock to the global economy."
"India is on the cusp of a real FDI take-off. Whether or not it achieves its potential will be powerfully influenced by how the Indian government manages its business policy environment," said Laudicina.
Caution:
Investors cite bureaucracy, political stability and maintaining a lower-cost advantage as the principal challenges to India's future competitiveness, for the country to translate investor confidence into actual FDI increases.
51 per cent of global investors view currency and interest rate volatility as a critical risk to operations, whereas 46 per cent of global investors cite political and social disturbances as a risk compared.
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