India's FDI Confidence ranking drops by 4 points in a year, from 7th to 11th position: Consultants AT Kearney

By Rajiv Shah
Top international consultants AT Kearney have noted that, despite Prime Minister Narendra Modi’s Make in India drive, India has dropped from the top 10 positions in foreign direct investment (FDI) confidence index for the first time since 2002. In a just-released report, “Connected Risks: Investing in a Divergent World”, the consultants’ rankings show that India in 2015 ranks No 11th, down from the seventh position in 2014.
All this has happened at a time when “the country's Make in India initiative, launched in September 2014, aims to improve the ease of doing business in India, and remove or relax foreign equity caps in several areas”, the report says. The report also notes this development when the Government of India’s “revised estimates” suggested the country’s gross domestic product (GDP) grew “faster than China’s last year”, and its consumer market remained “significant, sparking broad investor interest.”

The report notes that India’s FDI confidence index ranking was No 2 in 2007, when what then seemed to be an unstable Congress-led coalition at the Centre ruled the country. The ranking remained high over the years when the coalition was in power – No 3 in 2010, No 2 in 2012, No 5 in 2013, and No 7 in 2014, when the UPA government was thrown out of power by a sweeping win by Modi-led BJP.

Despite India “overtaking” China in GDP growth, the report notes that the country remains No 2 of the 25 top FDI Confidence index ranking. It says, “Business executives are carefully watching China for economic growth of around 7 percent, and for signs of a successful transition to a consumption-led economy.”

The report adds, “If those indicators emerge, most executives say their companies would increase investment activity into China. Overall, countries in Asia Pacific have a mixed showing in the Index, with Japan rising to 7th (from 19th last year), and South Korea reentering the Index at 16th after going unranked last year. Australia (10th), India (11th), and Singapore (15th) fall in the rankings but maintain top 20 positions.”
Interestingly, India’s ranking has petered despite the fact that only 12 per cent of business executives – one of the lowest among the top 25 countries – felt negative about India’s FDI confidence level. On the other hand as many as 28 per cent of executives felt positive about India, which was lower than only four other countries – US (46 per cent), Canada (35 per cent), Germany (33 per cent), and China (31 per cent).

Responses from business executives

The FDI Confidence Index, established by AT Kearney in 1998, claims to examine the “overarching trends in FDI”, ranking the top 25 countries. About its methodology, the report says, it is a “forward-looking analysis of how political, economic, and regulatory changes will likely affect countries' FDI inflows in the coming years”, adding, “Over its 17-year history, there has been a strong correlation between the rankings and global FDI flows.”

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