India still attracts foreign investors

24 January 2014
MUMBAI: Low labour costs and the size of its domestic market are among the most attractive features about India for foreign investors, according to a new survey, but concerns remain over the country's infrastructure and its business environment.

The EY India Attractiveness Survey 2014 from the global consultancy formerly known as Ernst & Young polled 502 global executives and found more than half (53.2%) were considering increasing their presence in India, live mint reported.

A full 86% regarded India's labour costs as its greatest strength, but respondents also cited poor infrastructure, taxation, an "unfriendly" business climate and uncertainty ahead of the general election in April-May as key challenges.

No less than 160 respondents (32%) said they had no investment plans for India, compared with just 61 out of 382 respondents (16%) in EY's 2012 survey.

Rajiv Memani, country managing partner at EY India, believed investors would consolidate their existing presence in the short-term, but for new players, 2014 would be decisive as the election results come in and expectations are formed about the pace of reform and deregulation.

"Investors are considering India for both their services and manufacturing supply chain, but for investments to materialise the environment must be more enabling and measures on other competitive issues, including currency stability and ease of doing business, must be implemented," he warned.

Of the respondents in the survey who had an emerging market strategy, nearly a fifth said India accounts for more than 20% of their total capital allocated for the developing world.

China continues to be India's main competitor for investment, according to nearly three-quarters of respondents (70.8%), but almost one-in-ten pointed to new destinations, such as Indonesia, the Philippines and Vietnam as emergent competitors.

Technology, media and telecom (TMT) as well as industrials remained the two top sectors for investment in the first nine months of 2013, the report found, but EY expected other sectors to become more attractive over the next two years.

These sectors, the Hindu Business Line reported, would include retail, automotive, life sciences and consumer products.

Data sourced from live mint, Hindu Business Line; additional content by Warc staff
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