India remains an attractive FDI destination

India remains an attractive destination for foreign direct investments (FDI) on account of healthy prospects of economic growth and its skilled workforce, according to a survey by Deloitte.

A large proportion of international business leaders remain confident in India's short- and long-term prospects and are readying plans to make additional and first-time investments in the country, it said on Tuesday.

"The survey, which questioned 1,200 business leaders of multinational corporations in the US, UK, Japan and Singapore, found that India remains an attractive destination for investments, scoring highly for its skilled workforce and prospects for economic growth," the survey - India's FDI Opportunity - said.

India can target attracting greater FDI into seven capital-intensive sectors - textile and apparel, food processing, electronics, pharmaceuticals, vehicles and parts, chemicals and capital goods - that have contributed $181 billion of merchandise exports in 2020-21, it added.

These seven sectors have the necessary potential, opportunity, and capability to show quick results and set a global precedent, the report noted.

It also said that more business leaders, especially in Japan, are making investments in India for access to the domestic market rather than using India as a springboard for exports.

"India has the strongest positive perception in the US when compared to markets such as China, Brazil, Mexico, and Vietnam...The US and UK business leaders expressed greater confidence in India's stability," it said.

The respondents from Japan and Singapore currently view Vietnam as their preferred investment destination, as per the report.

Despite recent reforms to improve the ease of doing business in India, the survey found that awareness among investors remains low.

Business leaders in Japan (16 per cent) and Singapore (9 per cent) were least aware of initiatives such as the digitisation of customs clearance and production linked incentives for manufacturers, it said.

"Accordingly, India was perceived as a more challenging environment to do business compared to China and Vietnam," it said, adding while India is perceived as both politically and economically stable, it scored lower on institutional stability, that is, regulatory clarity and efficient judicial redress and mechanisms.

Inadequate infrastructure was another negative factor cited by existing and potential investors, it said.

Deloitte Global CEO Punit Renjen said: "We believe the outlook can only get better because of India's improving ease of business, which includes fiscal benefits and other reforms.

"These positive steps further convince me that India is moving towards its ambition of a $5 trillion economy.”

N Venkatram, CEO, Deloitte India, said that directing FDI into capital-intensive sectors should be the focus, as it is key to the country's gross capital formation as well as establishing its position as a global trade partner.

"While global organisations look for alternative destinations to manufacture and India is well-positioned to capture a disproportionate share of the shift, the country must continue to enact reforms and initiatives that drive improvement, building confidence in and competitiveness of India's economy," he said.