The Hindu : Business : India top FDI destination on higher RoI: KPMG

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Friday, Jul 29, 2005

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India top FDI destination on higher RoI: KPMG

Special Correspondent

Infrastructure bottleneck hindering larger FDI flow

NEW DELHI: India has emerged as the top foreign direct investment (FDI) destination on the basis of higher returns on investment (RoI) that foreign investors earn in the country compared to the other emerging markets like China, Brazil and Mexico, a survey by the global consultancy firm, KPMG, has revealed.

The major bottleneck, however, is the infrastructure, which is hindering larger FDI inflow into India when compared to countries like China.

"India may need to make more rapid improvements in its business infrastructure if it is to continue to attract foreign investment in the face of growing competition from China, which it outperforms in many areas, including return on investment," KPMG said in its study report, `Manufacturing in India'. KPMG has noted that India scores over other Asian nations.

"Every dollar spent in India has a better return than is the case with other emerging markets that have a more favourable environment," the report said.

According to the KPMG India Managing Director, Ian Gomes, the study has noted that though improvements are being made in India's infrastructure, they are not fast enough. The report is also critical of the combined fiscal deficit of the Centre and the States at about ten per cent of the GDP and has noted that this severely limits spending on infrastructure improvement.

On the plus side, the report said that India was going to gain from its large pool of young working population as compared to that in China.On the negative side, it said there were 17 million households still classed as "destitutes" and 35 per cent of the population was still living on less than one dollar per day.

While appreciating the country's reform process, KPMG said reform in areas like labour regulation, business, bureaucracy and taxation needed to keep pace with the rapid rate of growth.

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