FDI-GDP ratio lower than that of Asian giants

Mumbai, Nov 18 | Updated: Nov 19 2005, 06:05am hrs
India is still lagging behind its South-East Asian counterparts in terms of foreign direct investment (FDI) stock to the country's gross domestic product (GDP). The country's FDI to GDP ratio is much lower as compared to those in other Asian countries such as Philippines, Thailand, Malaysia and even Vietnam, according to a study by the Export Import Bank of India (Exim).

The Exim study titled "FDI Flows and Investment Policies in India and Select Asian Countries: A Comparative Analysis" examines recent trends in FDI inflows and investment policy in India and select Asian countries, and identifies imperatives for enhancing FDI inflows.

The study observes that although FDI inflows into India have risen in recent years, the stock of FDI inflows for India is lower than other select Asian countries.

Key issues and concerns would include, according to the study, FDI caps and restrictions, weak and inadequate infrastructure, protection of intellectual property rights, tax administration, customs clearances, among others. "While the FDI policy in India has continuously been simplified and streamlined leading thereby to a liberal investment environment, the concerns and issues highlighted above would need to be addressed to ensure increased FDI inflows into the country," the study says.

Exim Revelations

India lags behind its South-East Asian counterparts in terms of FDI stock to the country's GDP
The ratio is much lower as compared to those in other Asian countries such as Philippines
The prospects for FDI inflows are positive both in the short-term and medium-term, countries are expected to intensify their efforts to attract FDI and would compete fiercely for it
Potential investors would become increasingly selective in choosing investment destinations

The study concludes that, while the prospects for FDI inflows are positive both in the short-term and medium-term, countries are expected to intensify their efforts to attract FDI and would compete fiercely for it, with investment targeting becoming an important tool. At the same time, potential investors on their part would become increasingly selective in choosing investment destinations. In light of these, the study stresses that developing countries in particular would need to carefully formulate their policies and investment promotion strategies.