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Security, terrorism worry foreign investors

By Our Special Correspondent

NEW DELHI, JUNE 27. India seems to have become a more attractive investment destination this year but security and terrorism weigh heavily on the minds of foreign investors. Infrastructure facilities, barring telecom, are also being described as "bad" by them. These are the findings of a survey carried out by the Federation of Indian Chambers of Commerce and Industry (FICCI), which describes foreign investors as being "extremely bullish" on India as an FDI destination.

The survey notes that 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 investors. Besides, factors such as exchange rate volatility, hardening commodity prices and higher interest rates in this country can also "spoil the party" as far as investment inflows are concerned. Global and regional trade initiatives will, on the other hand, give a boost to FDI inflows.

Releasing the survey today, FICCI says the FDI Attractiveness Index has registered a value of 3.9 per cent, a gain of almost 8 per cent from the previous two years. "The upward movement in the index value has meant that perception of the foreign investors about India as an investment destination has improved significantly and India is being perceived as a fairly attractive investment destination," says the survey that is on `The Experience of Foreign Direct Investors."

It says that 72 per cent of foreign investors surveyed made a positive assessment of this country as compared to only 40 per cent last year. As many as 86 per cent are planning expansion of operations, higher than 78 per cent in the FDI survey last year. Among States, Maharashtra remains the most popular foreign direct investment destination, followed by Karnataka, displacing Andhra Pradesh that is third this year. Tamil Nadu is fourth in the list followed by Gujarat.

The survey has identified five major areas — IT and related services, chemical and chemical products, rubber and plastic products, electrical machinery and apparatus, and services sector — where dedicated Government effort could result in strong FDI inflows.

All those surveyed in the IT and related services were most optimistic about this country while 89 per cent of those in the chemicals industry, 85 per cent in "other industries" and 80 per cent in the rubber and plastics sector were bullish about these sectors. It also said about 88 per cent of the companies termed the overall policy framework in India `average to good' while 79 per cent said availability of skilled manpower in India was good.

A substantial 77 per cent of the foreign companies said their Indian operations were making profits, FICCI said. As many as 86 per cent are planning expansion of their operations in this country.

Among the factors motivating foreign companies to invest here are market size, highly skilled manpower, and low cost of infrastructure and operation. At the same time, infrastructure facilities such as transport, roads, power and water availability are described as "bad."

0Investors felt political stability will be the key factor determining future FDI flows into the country, followed by stability in policy guidelines and reduction in ground level "hassles."

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