90% prefer China for FDI: Survey

NEW DELHI: A T Kearney vice-president and managing director Paul Laudicina today said that India was spending all its time regulating FDI into India rather than promoting it. He urged India to remove barriers and communicate more with investors.
According to an A T Kearney FDI Confidence survey, 36% of the driver-forces against investments in India is accounted for by red tapism. Other impediments perceived by investors, including potential investors, are the pace of reforms, particularly disinvestment, and inadequate infrastructure.
He said that 90% of the global FDI investors (the survey comprises an annual survey of the CEOs and CFOs and other top executives of Global 1,000 companies) said that they preferred China to India as a destination.
He said that FDI into India was expected to fall over the next few months as the latest confidence index has ranked India at the 15th position as compared to the seventh position last year.
The Confidence index has been, over the years an accurate indicator of future FDI inflows into India and there has been impressive correlation between India’s ranking in a year and the level of inflows in the subsequent year. In 1998, India was ranked fourth and FDI inflows had jumped from Rs 133, 398.4 million in 1998 to Rs 164, 253.3 million in 1999.
Similarly India was ranked eleventh in 2000 vis-a-via sixth in the previous year and inflows during 2001 fell to Rs 192,651 million from Rs 193, 417.4 during the previous year. During the current year India has recorded a 69% growth in inflows and its rank last year had improved to the eighth position.
Red tapism, infrastructure, implementation and unreliable government policy repulse away investors who first show investment interests. He further said that FDI by way of disinvestment should not be expected. FDI inflows into India next year will take a sever beating — it’ll be the worst year so far.
Answering questions about sectoral caps on FDI, he said that all investors want controlling-level ceilings. “It is a buyer’s market, if an investor wants more and doesn’t get it, he opts out,� he said. Talking about aviation specifically he said that he had spent a lot of time with major airline heads and India should expect no FDI from airlines in the post 9/11 and Singapore International Airlines-pullout scenario.
However, “to know India is to love India,� he said as existing investors are not averse to enhancing investments committed. However, the key is to attract fresh investments. He said that two years ago some sectors in India had seemed attractive and sector specific promotions were launched by the government.
These include services both financial and non-financial, telecom, hi-tech areas. These sectors have received bulk of the inflows thereafter. He also said that a majority of the investors were excited about India’s retail and non-financial sectors.
In this regard has said the damper by way of the silence of the NK Singh committee’s FDI report on the issue of opening up the retail sector should be looked at.
He also said that the concerns about China could be converted into motivating points for attracting investments by India. These include investors’ worries about double-speak by Chinese policy makers and the fact that 90% FDI into China is located in the three mega urban centres of Shanghai, Beijing and Shenzhen.
A major factor in favour of India apart from its big size, cheap, skilled and English speaking labour and market is the faith in the rule of law and the sanctity of commercial contracts, relatively speaking (vis-a-via China). On the Gujarat incidents, he said that they definitely had not helped the FDI inflows lined up for India.