A recent survey by UNCTAD, World Investment Prospects Survey 2010-12, once again brings out the developing economies? role to the forefront in the shifting global economic order. The survey based on the results of 236 transnational corporations and 116 investment promotion agencies finds that the recent crisis has proved to be less harmful for investment. It points out that half of the top 20 most promising investor nations will be developing economies over the next 3 years. It is for the first time that BRICs ranked among the top 5 investment destinations. China retained its top position for another year, with India up from third in 2009 and Brazil up from fourth, pushing the US down from second.
Both TNCs and IPAs were more upbeat regarding the overall business environment and expressed more positive views over a longer time horizon. The WIPS estimates that there will be a slow recovery in FDI inflows in 2010, before they gain momentum to touch $1.3-1.5 trillion in 2011 and $1.6-2 trillion in 2012. The findings corroborate that TNCs will give priority to the more resilient South, East and Southeast Asian economies in their future investment programmes. A swiftly changing global investment landscape will bring diverse opportunities for developing economies that will lead to their higher economic growth.
However, all this sanguine news must be tempered with words of caution, as attainability of these opportunities depends on several factors. Given that the developed world is not yet completely out of the woods, it is an opportune time for India to bring in concrete reforms that can improve its investment and business climate. The government?s recent initiatives of relaxing FIPB?s limit to clear proposals and release of a comprehensive FDI policy document are welcome moves. Nevertheless, just these kinds of initiatives will not suffice for India to become the second-most important FDI destination by 2012. India needs a better focus on its infrastructure development. Also, we need to reform our labour laws, provide superior SEZ schemes and apt institutional mechanisms. Sectors such as food retailing, telecom, defence, power generation need to be opened further to allow equitable competition. We need to remove administrative bottlenecks and delays in project implementation that occur mainly due to a lack of coordination between the central and the state governments.
jaya.jumrani@expressindia.com