India Will Soon Attract More Fdi Than China

As the India versus China debate rages on, a new study by the Federation of Indian

Chambers of Commerce and Industry (Ficci) indicates that India is poised to attract more foreign investment in the near future.

The recent developments that have taken place in China a series of strikes affecting operation of select MNCs, subsequent wage hikes, expectation about appreciation of the yuan and efforts to recalibrate growth strategy away from exports towards domestic demand could lessen its attractiveness as an investment destination, the study stated.

Companies that were surveyed believe these developments will tarnish Chinas image as an attractive destination for FDI, and nearly three-fourths of respondents said some of these investment flows may be redirected to India.

However, the survey did caution that India needed to rectify its infrastructure and bureaucratic bottlenecks at the state level before it could efficiently utilize these new inflows.

Indias large and ever-growing domestic market has emerged as the chief motivating factor for foreign investors to invest in India.

Roughly 87 percent of survey respondents rated the growth rate of the Indian market as high.

The primary advantage a large market grants is the ability to use economies of scale, and foreign companies are seeking to exploit this advantage and develop India as an export base.

When asked whether India can emerge as a major manufacturing base given the current global shift in manufacturing from high cost western destinations to lower cost emerging ones, 88 percent replied in the affirmative.

Ironically, results of the Ficci FDI Survey 2010 show that nearly 50 percent of respondents, companies who have already put money in India, were not aware of the consolidated FDI policy document brought forth by the government earlier this year in March 2010.

by: Chris Devonshire-Ellis

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