Even as the pandemic and geopolitical conflict resulted in investor uncertainty, India has the potential to attract Foreign Direct Investment (FDI) flows of $475 billion in the next five years due to the focus on reforms and economic growth, according to a report by the Confederation of Indian Industries (CII) and EY.
The report noted that FDI in India has seen a consistent rise in the last decade, with FY 2021-22 receiving FDI inflow of $84.8 billion despite the impact of the COVID-19 pandemic and geopolitical developments on investment sentiment.
“India is seen as an emerging manufacturing hub in global value chains, as a growing consumer market and as a hub for ongoing digital transformation. In addition, in a rapidly changing geopolitical environment, India’s large and stable democracy and consistent reform measures are recognized by the MNCs (multinational company),” the report said.
The report titled ‘Vision—Developed India: Opportunities and Expectations of MNCs’, added that 71% of MNCs working in India consider the country an important destination for their global expansion. The optimism is driven by both short-term as well as long-term prospects.
“A majority of MNCs feel that the Indian economy will perform significantly better in 3-5 years backed by 96% of respondents being positive about overall India’s potential,” the report said.
The confidence in India’s potential, according to the report, stems from strong consumption trends, digitisation and a growing services sector, along with government’s strong focus on infrastructure and manufacturing. The Indian government’s consistent efforts to reduce regulatory barriers is also stoking the positive perception among MNCs, it said.
Over 60% of MNCs in the report stated improvement in the business environment in the last three years. “As continuing improvement in business environment, MNCs would like to see enhanced effectiveness of the national single window for approval / clearances; greater tax certainty, and stronger contract enforcement mechanism, among other measures,” it said.