B&E | India Leads As Best Investment Destination with Ifs and Buts : Ernst & Young

By CounterView One of the world’s top consultants, Ernst and Young (EY), known for catering to the “requirements” of its clie...

By CounterView

One of the world’s top consultants, Ernst and Young (EY), known for catering to the “requirements” of its clients who include both government and global business players, has rated India as the best investment destination in the world. In a survey carried out among 505 business executives from 28 countries, E&Y has said “A leading 32 per cent of the investors ranked India as the most attractive market this year.”

Titled “EY’s attractiveness survey India 2015: Ready, set, grow”, and brought out ahead of Prime Minister Narendra Modi’s scheduled visit to the United Kingdom (UK) in November second week, EY survey finds that less than half the “decision makers” that of India – just about 15 per cent – considered China as the as the most best investment destination.

This is followed by Southeast Asia 12 per cent), Brazil (5 per cent), North America (10 per cent), Latin America (3 per cent), the Middle East (four per cent), Western Europe 4 per cent, Japan 3 per cent, and Russia 1 per cent. The survey was carried out with the help of business executives, government leaders, and EY professionals.”

The main issues addressed in the survey included whether labour costs, domestic market, macroeconomic stability, labour skills, stable political and social environment, research and development availability, FDI policy, ease of doing business, flexibility in labour law, and so on.

Impact of India's economic reforms on attracting FDI

An earlier World Bank report, which also ranked India as the best business destination, had specifically mentioned that it had taken the help of the Department of Industrial Policy and Promotion (DIPP), Government of India, for preparing the report. While, the EY report refrains from saying any such thing, two of its top commentators are Amitabh Kant, secretary, DIPP, and S Jaishankar, India’s foreign secretary.

It is, however, well known that EY was one of the topmost clients of the Gujarat government under the chief ministership of Narendra Modi, and promoted Gujarat’s high-profile biennial Vibrant Gujarat global investment summits worldwide between 2003 and 2013, dishing out propaganda material and organizing meetings with business executives for Modi.

EY’s chairman, India region, Rajiv Memani, in the foreword, says, the report reflects outcomes of Modi’s visits to “about 30 countries since May 2014, including India’s primary sources of FDI: the US, Japan, Germany, China, Korea and Australia.”

He adds, “We’ve seen a sharp turnaround in FDI in 2014. After declining for two successive years, investment in India has bounced back with a 32% growth to US$25b — significantly ahead of the 7% growth in FDI seen globally. Further, with FDI capital inflows of US$30.8b during the first half of calendar year 2015, India has emerged as the number one FDI destination in the world.”

In the chapter, “FDI in India: A V shaped recovery”, the report, however, admits, that India is still below the 2011 in FDI investment level. It says, “Though still far below the 2011 peak, the number of FDI projects rose 37% in 2014, with a proportional increase in jobs created by FDI.”

“The upturn marks a significant change from 2012 and 2013, when slow economic growth, regulatory hurdles, lack of transparency and policy paralysis had deterred investors. Investor confidence in India has been strengthened by improving economic growth and investor-friendly moves by the new Government”, the report points out.

However, there are still issues, it indicates: “Investors have generally been cautious. In 2014, the average project involved an investment of US$37m, compared with US$40m in 2012 and US$53m in 2010. Investors are positive but wary and keen to see real improvements in the business environment.”

“The uptick in FDI projects into India contrasts with a 3 per cent slide in the number of FDI projects worldwide, while it outpaced the 17% rise across the Asia-Pacific region. After a steep fall in 2013, FDI in manufacturing grew at its fastest in seven years”, the report says, adding, “In 2014, investors announced plans to invest a total of US$11.4b in 192 FDI projects, creating more than 67,000 jobs.”

The survey found that of the 505 business executives interviewed, 55 per cent were aware of the Make in India programme. However, it regrets, “There is a need to create visibility for the campaign among non-established players, as only 10 per cent of those without a presence in India were aware of it.”

This article was first published at CounterView.com on October 23, 2015 under Creative Commons License 4.0

AIDN: 001-10-2015-0355