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India: ready for the transition?

Welcome to the second edition of the Ernst & Young's India attractiveness survey.

The 2012 India attractiveness survey was carried out at a time when the dialogue among business leaders about the economic crisis was at its peak and investors were in “caution” mode. Regardless of today's crisis, a strong increase in the number of foreign direct investment (FDI) projects in India is a clear indication that global investors view the country as an attractive investment destination. More than half of our respondents remain convinced about India’s long-term prospects and plan to strengthen their operations in the country, with more than two-thirds of those interested in India, planning to implement projects in the short term.

The fundamentals that make India attractive to investors remain intact. The high potential of the domestic market driven by an emerging middle class, cost competitiveness and a mammoth pool of talent continue to make India one of the most preferred destinations for our survey respondents this year as well. The country’s domestic demand-driven growth model is playing a catalyst role in attracting foreign investments in the country.

Although the ongoing global uncertainty stemming from recessionary concerns and sovereign debt crisis has, to some extent, prompted some discomfort among global investors to make long-term commitments, India’s inherent advantages and its proven resilience to counter macroeconomic challenges far outweigh these concerns. India is transitioning into the next phase of the growth cycle. Manufacturing will likely play a leading role in this growth trajectory. While the country leads the world ranking as a shared services destination, it is rapidly emerging as a manufacturing location for many foreign corporations. By 2020, 25% of our survey respondents see India among the world’s leading three destinations for manufacturing. The new National Manufacturing Policy introduced by the government of India (GOI) is expected to further boost manufacturing activities in the country.

The overall outlook for India remains positive. However, our respondents continue to cite inadequate infrastructure and a lack of governance and transparency as major obstacles to investment. The majority of our respondents believe that improving these obstacles will have a high impact on India’s attractiveness. The Government, though sensitive to the challenges, has to hasten policy-making and implementation, so that India continues to remain attractive.

We have tried to build upon our first edition of the India attractiveness survey by including a section on India’s transition to the next phase of growth driven by the manufacturing sector. Another key element of our report is an analysis of eight priority sectors, which we believe would be the game-changers and drive the FDI momentum in the country. As we present our second edition of the India attractiveness survey, we would like to thank all the decision-makers and Ernst & Young professionals who have taken the time to share their thoughts with us.

Read the survey below:

Vendredi 3 Février 2012