Moving Up On Index Ranking Need Not Result In Higher FDI Inflows

New Delhi, Sept 17: | Updated: Sep 18 2003, 05:30am hrs
While India may have gone up signigficantly on the 2003 annual AT Kearney global foreign direct investment (FDI) index from 15 to six, it need not translate in the future into proportionate FDI infows till some key issues are addressed.

Offshoring, comprising services like information technology (IT) and business process outsourcing (BPO), may have emerged as a key driver of FDI in India, but the growing opposition to it in the west could be regarded ominous signs for all stakeholders.

These are some of the sentiments expressed by AT Kearneys global business policy council vice-president and managing director Paul A Laudicina during a teleconference with FE from the US on the occassion of the launch of the FDI index.

The annual index shows India move up from the 15th position in 2002 to sixth this year. The top two positions have gone to China and the US respectively, followed by Mexico, Poland and Germany in that order. While India was seventh in 2001, the sharp fall in 2002 has been attributed largely to the Indo-Pakistan armed forces stand-off at the border.

Indias high rank is largely being seen as an attractive off-shore option. But the rising backlash is due to jobs even higher up the value chain, long considered the preserve of western workers, also going to countries like India. This backlash needs to be monitored closely, said Mr Laudicina.

Any legislation blocking off-shoring will have an impact on FDI flows, but it would not be in the best interests of any concerned. Both the host and destination countries have to make a strong business case showing benefits for all stakeholders, he added.

Mr Laudicina also cautioned that moving up the index ranking need not necessarily translate into proportionately higher FDI inflows for India. Issues of bureaucracy, infrastructure, slow pace of reforms and policies still act as hurdles to FDI inflows.