The Indian Economy Blog

December 27, 2005

Investments In India: On The Rise

Filed under: Business,Capital markets,Growth,Infrastructure,Regulatory reforms — Prashant @ 1:06 pm

Consulting firm A T Kearney’s annual survey of FDI destinations reveals that

For the first time in the history of the Index, which began tracking the FDI intentions of global executives in 1998, emerging market countries are ranked first and second as the most attractive FDI locations in the world.

… China and India took the first and second spots across nearly all broad sector categories.

While China has held the first spot since 2002, a strong increase in investor interest in India is a more recent development. Despite India’s successful positioning as a business processing and information technology outsourcing hub, these activities often translate into Indian service sector exports via third party transactions — not FDI. Last year, Indian FDI inflows reached $5.3 billion, compared with China’s $60.6 billion. India has yet to build a critical mass in FDI, having only initiated investment-attracting reforms in 1991. China’s pro-FDI regime has been in place since 1979. India’s technology and IT-oriented economy has received fewer capital-intensive FDI flows relative to China, whose entire manufacturing base has been, in large part, established by foreign multinational companies.

“India is on the cusp of an FDI take-off. However, for India to harness manufacturing investor interest and evolve into an FDI capital-intensive hub, the government must maintain its reform orientation and overcome narrow business interests, consistently addressing the country’s infrastructure, logistics, and regulatory barriers”.

The rankings…

FDI rankings

…and the actual numbers (sans 2005, which should be updated shortly)

India’s numbers are still still way behind China’s (or what the US was receiving until last year), but hey… we’re moving… fitfully, but in the right direction.

5 Comments »

  1. This is all welcome and interesting news. And of course the attractiveness of a country for FDI is an important measure of something. At the same time I think it is important to note that investment in China is not a primarily FDI story, in fact China has to continually export funds to balance the books. The driver behind China’s massive investment programme is domestic saving, and we should look to this phenomen too in India as a measure of real take-off.

    The big issue is: do you get the sweet moment because you get the FDI, or do you get the FDI because you hit the sweet moment. Experience from China and the earlier Asian Tigers suggests the latter.

    Comment by Edward — December 27, 2005 @ 1:18 pm

  2. The rankings and figures dont go well ?

    We know indias 2005 FDI is 10 billion !! How did it displace USA ?

    Did USA get

    Comment by Navin — December 30, 2005 @ 4:22 am

  3. This is very good news for Indians who wanted India to be superpower as its strengths are promising and the free trade gives a chance to prove the strenths in International market, and India is progressing and promising the future of Indians positive, and great human resources and highly entrepreneurial qualities we possess and deliver the goods and much more needed to be done in the domestic front in order to outsmart already much advanced nations with whom we are competing in border less market.

    more employment will be created if many sectors are encouraged by the State policies and more financial availability to the investors to participate in economic activity, thus we can reduce poverty levels relatively and the scientific community could contribute if boost given to the research and development.

    We are aware that most of our people are haardworking and loyal so its not difficult to achieve higher growth rates soon. All the best Mighty India.

    Comment by Boppana Nagarjuna — January 2, 2006 @ 6:51 pm

  4. A little increase in FDI, despite its being way below what China recieves is sufficient for our Indians who arefathoming dreams of making it very big in the world economy basking in the recently found glory in respect of few sectors. The fact is we are nowhere near the advanced countries, we have not yet remotely become the world beaters .We are a small shade better than a few other emerging economies as we started opening up. A stage will come when we get more and more FDIs , before we reach the stage of stagnation of further FDI inflows.The problem is not in attracting the FDIs, they will flow wherever the potential is high; but the real problem is when they are withdrawn. It is really strange that we have come to a stage where we are equating the groth of the economy to the inflows of FDIs, a far cry from the days of self reliance.mscrao@gmail.com

    Comment by mscrao — January 17, 2006 @ 9:03 pm

  5. The capricious speed of inflation in the indian economy is a result of two facts-The drawbacks in the foreign policy of the UPA government and the priority given by the developed countries for the agrobusiness culture.The priority given for the producction of biofuels over the food producing crops terraced the sails of world economy towards less production of neccesary or basic items which is the main source of energy for the most poor population of the world….keeping into account the backward or less developed countries of the world…..these are the main reasons for the sudden increased rate of inflation in the main agricultural countries of the world…including India…for further details or discussion about the topic please mail me at div_electronica@yahoomail.co.in….you views would be red-carpetted.

    Comment by divyanshu pangaria — May 6, 2008 @ 2:34 pm

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