The Hindu : Business : India third most attractive FDI destination: Kearney

Online edition of India's National Newspaper
Wednesday, Oct 13, 2004

Business

Business

India third most attractive FDI destination: Kearney

By Alok Mukherjee

NEW DELHI, OCT. 12. India and China are aggressively challenging the U.S. as the world's most favoured destination for foreign direct investment, says a study.

The latest study on the Foreign Direct Investment Confidence Index by the global management consultant firm, A.T. Kearney, is based on an annual survey of executives from the largest companies.

The study found that India had risen from the sixth to the third most likely FDI location globally, the country's highest ranking ever, just behind the U.S. China maintained its top ranking. Though the U.S. remained in the second position, the gap between the U.S. and India may be closing. "As China and India forge their leading positions in the global economy, the U.S. and the rest of the world will face severe competitive pressures from these two dynamic and rapidly evolving economies," the firm said.

A.T. Kearney said China and India dominate the top two positions for the most positive investor outlook, likely first-time investments and most preferred offshore investment locations for business processing functions and information technology services. Compared to other large emerging markets, China and India are cited by chief executives as the most attractive FDI destinations in the short-term (next three years). And in the next 10 years they would beat markets such as Brazil, Mexico and Poland for medium-term attractiveness.

Different advantages

However, global investors view these two destinations as distinctly different markets — China as the world's leading manufacturer and the fastest-growing consumer market and India as the world's business process and IT services provider, with longer-term market potential. Investors favour China over India for its market size, access to export markets, government incentives, favourable cost structure, infrastructure and macro-economic climate. However, these same investors cite India's highly educated workforce, management talent, rule of law, transparency, cultural affinity and regulatory environment as more favourable than China's. FDI flows to China are larger ($53.5 billion) and primarily capital-intensive while the flows to India are smaller ($4.3 billion) and skill-intensive, concentrated in information and technology areas.

India displaces U.S.

For the first time in the Confidence Index, India displaced the U.S. to become the second most attractive FDI location among manufacturing investors, while the U.S. fell to the third place. Never before has the U.S. been ranked so low among manufacturing investors, Kearney said. Telecom and utility investors upgraded China from fourth place to first and India from the fifth to the second most attractive FDI destinations, while dropping the U.S. from the first to fourth place, just behind Hong Kong.

India's strong performance among manufacturing and telecom and utility firms was driven largely by the desire to make productivity-enhancing investments in IT, BPO and R & D.

Printer friendly page
Send this article to Friends by E-Mail

Business