MNCs optimistic about India's growth prospects India’s FDI could touch US$475 bln in next 5 years: CII-EY report
71% of Multi-National Companies (MNCs) working in India consider the country as an important destination for their global expansion. The optimism is driven by both short-term as well as long-term prospects. A majority of MNCs feel that the Indian economy will perform significantly better in 3-5 years backed by 96% of respondents being positive about overall India’s potential, according to a report released by CII-EY titled “Vision – Developed India: Opportunities and Expectations of MNCs” at CII’s National Conference on MNCs 2022, organized on 14th October 2022 in New Delhi.
The report underscores that India has optimistic growth prospects for foreign investments with a potential to attract FDI flows of US$ 475 billion in just the next 5 years. FDI in India has seen a consistent rise in the last decade, with FY2021-22 receiving an FDI inflow of US$ 84.8 billion, despite the impact of the pandemic and geo-political developments on investment sentiment.
“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 investment from MNCs and facilitate their larger integration in domestic supply chain," said Mr Chandrajit Banerjee, Director General, CII.
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 3rd highest behind only the US and China while the fast-expanding digital economy is expected to reach US$ 1 trillion by 2025.
Besides the fact that India is among the fastest-growing large economies in the world, the confidence in India’s potential stems from strong consumption trends, digitization, and a growing services sector, along with the government’s strong focus on infrastructure and manufacturing, the report mentions.
A large 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% of MNCs in the report stated improvement in the business environment in the last three years. MNCs appreciate the impact of GST, the government’s digital push in various spheres, and transparency in taxation, amongst other reforms.
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.
What also makes India an attractive investment destination for MNCs, besides the consistent reform measures, is it being a large and stable democracy. Majority of the respondents also see India as an alternative for their China+1 Strategy.
93% of the respondents feel that investment in Sustainable Development Goals (SDGs) and in climate change mitigation and adaptation is essential. Additionally, a large majority of the respondents (82%) agree investing in Sustainable Development Goals is essential.
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 with 82% supporting the trade initiatives as they expect them to create new opportunities.
By way of ongoing reforms, MNCs expect momentum on faster execution of infrastructure projects, continuing improvement in ease of doing business, further tax reforms and more trade agreements. They further recommend that the government should focus on implementing the infrastructure projects and project preparation timelines, especially for the Public-Private Partnership (PPP) projects and development of competitive business clusters through the Development of Enterprise and Service Hubs (DESH) initiative.
The CII Director General also observed “the confidence in India’s potential, stems from fast economic growth, from strong consumption trends, digitization and a growing service 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.”
15-10-2022
New Delhi