Financial Daily from THE HINDU group of publications
Monday, Jun 28, 2004
Industry & Economy
Foreign investors more upbeat on India: FICCI
New Delhi , June 27
THE Federation of Indian Chambers of Commerce and Industry (FICCI) Foreign Direct Investment (FDI) survey 2004 on `The experience of Foreign Direct Investors in India,' reveals a much-improved performance amongst the participating companies vis-à-vis results obtained last year.
It also shows an improvement in the perception of foreign investors about the operational parameters and the prevailing market conditions in India.
A measure of India's attractiveness as a FDI destination indicates a gain of almost eight per cent, up from 3.6 in the last year to 3.9 in the present survey. The upward movement in the index value has meant that perception of foreign investors about India as an investment destination has improved significantly , FICCI said.
The survey identifies five thrust areas where a dedicated effort by the Government would result in strong FDI inflows in the near to medium term. These include information technology and related services, chemical and chemical products, rubber and plastic products, electrical machinery and apparatus and services sector. A large proportion of respondents from the above sectors have assessed India favourably as an investment destination, perceive opportunities for greater FDI in their industry/sector and are planning expansion of their Indian operations.
While the outlook for FDI inflows into India in the near to medium term remains positive, security and terrorism concerns weigh heavily on the minds of foreign investors.
Besides security concerns, factors such as exchange rate volatility, hardening commodity prices and higher interest rates in home country can also spoil the party as far as investment inflows into India are concerned. Global and regional trade initiatives would, on the other hand, boost FDI inflows into India. Further, the participating companies were extremely bullish on India with 73 per cent of the respondents making a positive assessment of India as an investment destination.
This is a sharp rise in comparison to the response received last year, where only 40 per cent of the respondents placed India on their positive list.
Pointing out India's strengths, the survey reveals three motivating factors - market size, highly skilled manpower and low cost of infrastructure and operation, for the companies' entry into India.
Among the weak links, ground level bottlenecks continue to be a major impediment for foreign investors. As far as infrastructure facilities available in the country are concerned, there is still a lot of room for improvement, it said.
The quality of service at ports and airports still leaves a lot to be desired.
Ranking the top fives States that attract FDI, the survey reveals that Maharashtra retains its leadership position. Karnataka has toppled Andhra Pradesh for the second position, with Andhra having to contend with the third position. Tamil Nadu and Gujarat have retained their positions of four and five respectively.
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