However, it added that strong economic performance and the sheer size of the Indian market are also likely to attract investors.
India has slipped by three notches to 11th position in the FDI Confidence Index 2018 of global consultancy firm A T Kearney. “India falls by three spots, reversing its two-year streak of rising in the rankings,” the report said. It said that India fell out of the top 10 for the first time since 2015. China (5), India (11), and Singapore (12) all rank lower this year, while Australia rises to 8th and New Zealand jumps to the 16th spot in only its second year on the Index. Japan and South Korea hold steady at 6th and 18th, respectively, it added. India was ranked 8th in 2017, while it was at 9th rank in the previous year. The report said that some policies may have deterred investors, at least in the short term.
“The 2017 nationwide goods and services tax (GST), for example, has faced implementation challenges, and the 2016 demonetisation initiative disrupted business activity and weighed on economic growth,” it added. About Asia Pacific region, the report said that investor preference for the region appears to have “declined slightly”, with only seven Asian countries appearing on this year’s Index. “The flip side is that this year marks an all-time low for the share of emerging markets on the Index. Just four emerging markets appear among the top 25 countries for FDI intentions: China, India, Mexico, and Brazil. This suggests that confidence in investing in specific emerging markets has declined,” it said.
However, it added that strong economic performance and the sheer size of the Indian market are also likely to attract investors. Investors based in the Americas and in the industry sector rank India the highest in terms of their intention to invest there, it said. “This confidence may be a result of the governments Make in India initiative, which aims to boost investment in India’s manufacturing sector as well as its pursuit of closer ties with the US,” it said.
Reforms that have had a positive impact on India’s attractiveness include the elimination of the Foreign Investment Promotion Board, a government agency responsible for reviewing all potential foreign investment, and the liberalisation of overseas investment thresholds for the retail, aviation, and biomedical industries, the report said. FDI in the India grew by a marginal 0.27 per cent to USD 35.95 billion during April-December 2017.