67% MNCs see India among top choices for FDI, says CII-EY survey

Respondents cite country's market potential, skilled workforce and political stability as three key factors, along with cheap labour, policy reforms and availability of raw materialsIndia has emerged

India has emerged as the leading choice for foreign direct investment (FDI), a latest survey of multinational corporations (MNCs) has revealed. The survey, conducted by the Confederation of Indian Industries (CII) and EY found, India is set to become one of top three destinations for FDI inflow by 2025.

As per the respondents, the country’s market potential, skilled workforce and political stability are the three key reasons that make India their favoured destination. Further, availability of cheap labour, policy reforms and availability of raw materials, are positive factors that boosts India’s prospects. Recently enacted reforms in the country such as corporate tax cuts, measures to improve ease of doing business, simplification of labour laws, FDI related reforms and its focus on human capital, helped India’s image as a destination for FDI.

More than 67 per cent of the MNC respondents said, India is among their top choices for future investments. While among foreign MNC respondents, 25 per cent view India as the first choice for future investments. The survey shows that more than 80 percent of all the respondents and 71 percent of the non-Indian headquartered respondents plan to make investments globally by 2023. And about 30 percent of companies are planning to invest more than US$ 500 million (Rs 3,700 crore).

“The CII-EY survey results strongly indicate that India will be the next global investment hotspot with a high proportion of MNCs placing it at the top of their investment agenda. The recent major structural reforms, proactive Government processes and the quick pickup in economic activity following Unlock measures are contributing to global investor interest,” said Chandrajit Banerjee, director general, CII.

As per the survey, effective implementation of labour laws and FDI reforms are being cheered by 40 per cent of the foreign MNCs, while 52 percent of the Indian firms said, corporate tax rate reduction would be the prime mover of future investments.

Since the pandemic hit the economy, FDI inflows have suffered. According to Department for Promotion of Industry and Internal Trade, FDI equity inflows into India contracted by 60 per cent year-on-year to $6.56 billion (Rs 49,820 crore), from $16.33 billion, during April-June quarter.

Respondents suggested a bunch of measures that need to be taken to further improve India’s prospects. Infrastructure development, faster clearances, implementation of the improved labour laws and labour availability as the most important issues that the companies want the government to focus on, apart from investment in R&D, focus on innovation and overall tax reforms.