India moves up to 8th position in global FDI Confidence Index

The Dollar Business Bureau

The 2017 A.T Kearney Foreign Direct Investment Confidence Index places India among the top ten for the second consecutive year. India's ranking moved up a notch this year due to the opening up of many sectors to FDI under the aegis of PM Narendra Modi.

Investors surveyed were upbeat about the reform initiatives taken up this year by the Indian government, including the revamp of indirect taxation policy via the GST bill. The proposed tax amendment will unify the Indian market and make inter-state transit of goods and services more efficient. The digitalised single-tax regime subsuming multiple taxes levied separately by the State and Centre is also expected to reduce administrative burden.

Even as India scraps the need for FDI approvals in the sectors of telecom, defence and broadcasting, the government is considering expansion of FDI in retail to boost its Make in India initiative. The opening up of food retail sector recently saw a proposal being submitted by Amazon while Walmart is still studying India's FDI guidelines to find a way in. India has allowed 100% FDI in single brand retail with a caveat of 30% local sourcing. The 51% FDI allowance for multi-brand retail has not proved effective in attracting multinationals barring British firm Tesco.

Pharma and civil aviation were also thrown open to 100% FDI in a drastic reform initiative in June 2016.

Despite the rise of protectionism in USA and the exit of UK from EU, both the developed economies fared well on the list as top FDI-attracting destinations. While USA continued to stand first, UK moved up one spot this year to secure the fourth position. This suggests that underlying investment fundamentals like technological capabilities, efficient regulation and transparent taxation overpower fleeting geopolitical factors. Moreover, rising inward focus observed in developed economies may further push companies to locally establish themselves in the US, in order to keep their markets in Western land of prosperity intact.

India, the world's fastest growing major economy, while attractive for its growth potential and diversity, was preceded by USA, Germany, China, UK, Canada, Japan, and France in the same order.