India remains an attractive destination for investments, scoring highly for its skilled workforce and prospects for economic growth, says Deloitte Survey. It found that a large proportion of international business leaders remain confident in India’s short-term and long-term prospects, and are readying plans to make additional and first-time investments in the country.
One of the key findings of the Deloitte Survey is that amongst the first-time investors, nearly two-thirds are planning investments in India within the next two years. “When asked to identify sectors most likely to see new investments in India, utilities (energy infrastructure) led the way by 57%, financial services by 49% and healthcare by 48% also ranked highly,” it said. “Although there is a significant crossover, more business leaders, especially in Japan, are making investments in India for access to the domestic market rather than using India as a springboard for exports.”
Punit Renjen, Deloitte Global CEO, said after the challenges of the past 18 months, the Deloitte survey is a positive validation of the underlying strengths of the Indian economy. “We believe the outlook can only get better because of India’s improving ease of business, which includes fiscal benefits and other reforms. These positive steps further convince that India is moving towards its ambition of a USD 5 trillion economy.”
The survey revealed that perception of India is strongest in the United States and the UK. When compared to markets such as China, Brazil, Mexico and Vietnam, India has the strongest positive perception in the US. Deloitte says given US and UK strong historic ties with India, US and UK business leaders expressed greater confidence in India’s stability. “However, respondents from Japan and Singapore currently regard Vietnam as their preferred investment destination.”
Moreover, business leaders rated India higher on economic growth and skilled workforce. “While India is perceived as both politically and economically stable, it scored lower on institutional stability, i.e. regulatory clarity and efficient judicial redress and mechanisms. Inadequate infrastructure was another negative factor cited by existing and potential investors.” The survey predated the Indian government’s recent decision to rectify the long-running retrospective taxation issue with an amendment in the tax law, a significant boost for investor confidence.
Furthermore, it should be noted that despite recent reforms to improve ease of doing business in India, awareness among investors remains low. The survey pointed out that business leaders in Japan (16%) and Singapore (9%) were least aware of initiatives such as the digitization of customs clearance and production linked incentives for manufacturers. As such, India was perceived as a more challenging environment to do business compared to China and Vietnam. About 75% of business leaders said they were more willing to invest in India after being made aware of existing government programmes, incentives and reforms.
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India can target attracting greater FDI into seven capital-intensive sectors, Textile & Apparels; Food Processing Industry; Electronic Goods; Pharmaceuticals; Vehicles & Parts; Chemicals & AP; and Capital Goods that have contributed USD 181 billion of merchandise exports in FY2020-21. Deloitte believes India can target an additional USD 1 trillion of merchandise exports in the next five years by attracting higher FDI into capital investment-led focus sectors through schemes such as PLI.