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India has optimistic growth prospects for foreign investments with a potential to attract FDI flows of $475 billion in just the next five years, a CII-EY report has projected.
FDI in India has seen a consistent rise in the last decade, with FY22 receiving an inflow of $84.8 billion, despite the impact of the pandemic and geopolitical developments, said the report titled “Vision – Developed India: Opportunities and Expectations of MNCs”.
About 71 per cent of multinational companies (MNCs) working in India consider the country an important destination for expansion. The optimism is driven by both short-term as well as long-term prospects. A majority of MNCs feel the Indian economy will perform significantly better in 3-5 years, backed by 96 per cent of respondents being positive about the overall potential, according to the report.
Increasing investments
“Against the backdrop of growth challenges being faced by major economies of the world and new geopolitical issues, it is heartening to note that MNCs consider India an attractive investment destination and are planning expansion. We are confident that the continuing reform momentum by the government will attract increasing volume of investments from MNCs and facilitate their larger integration in the domestic supply chain,” said Chandrajit Banerjee, Director General, CII.
Sudhir Kapadia, Partner, Tax & Regulatory Services, EY India, said: “The report, in collaboration with CII, captures the MNCs’ perspective on steps that the government must take and policy measures that will power the next leap of economic development. Additionally, it also shares industry views on initiatives that will lead to the decarbonisation of India’s economy to further boost its sustainability efforts.”
India recently emerged the fifth-largest economy in the world, and it will continue to follow this growth trajectory in the coming years as well. It is seen as an emerging manufacturing hub in global value chains, a growing consumer market, and a global leader in the digital transformation of government and private sectors alike, Kapadia added.
‘Stable partner’
Soumitra Bhattacharya, Chairman, CII National Committee on MNCs, and Managing Director, Bosch India, said, “In the tumultuous backdrop of pressures on the global investment environment, recovery from the pandemic’s after-effects and geopolitical conflicts, it is reassuring to note that multinational investors continue to consider India as a stable partner as well as an attractive investment destination.
The CII-EY report highlights the factors that are attracting investors and what more needs to be done to maintain this momentum. It is time for India to leverage its strengths to enhance its role in the global economy while meeting the aspirations of its large and mostly young population, it said.
According the report, the direction of India’s growth is being determined by the strong momentum in domestic consumption, services, digital economy and infrastructure. The estimated real growth in consumption is the third highest, behind only the US and China while the fast-expanding digital economy is expected to reach $1 trillion by 2025.
Besides, the confidence in India’s potential stems from strong consumption trends, digitisation and a growing services sector, along with the government’s strong focus on infrastructure and manufacturing, the report added.
Majority of MNCs laud the government’s consistent efforts for improving the business environment in the country which has been at the core of their growing interest in the Indian economy. Over 60 percent of MNCs said there was an improvement in the business environment in the last three years. MNCs appreciated the impact of GST, the government’s digital push in various spheres and transparency in taxation, among other reforms.
The country’s thrust on structuring modern Free Trade Agreements (FTAs) to boost trade and create cross-border investment opportunities also finds favour with MNCs as 82 per cent of them support the trade initiatives which they believe will create opportunities.
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