According to UNCTAD’s World Investment Prospects Survey 2012–2014, India is the third-most attractive destination for FDI (after China and the US) globally. Indian markets have significant potential offering prospects of high profitability and favorable regulatory regime for investors. Investors are considering India for developing both services and manufacturing supply chain. For investments to materialize, economic environment has to become more enabling and measures on major competitive issues, including currency stability and ease of doing business, must be implemented. The consumer products, industrials, technology, media and telecom (TMT) and life-sciences sectors are set to attract massive foreign direct and indirect investment which will drive India’s growth to a much higher level over the next two years.
Japanese institutional investors have ranked India number one with regard to investment potential in comparison to key emerging markets which is a sign of growing Investor Confidence in a country that is struggling to recover from its slowest growth rate in a decade. The relaxation in the FDI policy in sectors such as petroleum and natural gas, commodity exchanges, power exchanges, stock exchanges, asset reconstruction companies, single brand product retail trading, telecom and courier services is the result of India’s persuasion of a more liberal investment outlook. In the maiden Union Budget of 2014-15, the announcement of a substantial increase in the foreign investment limit in defense, manufacturing and insurance sectors showcases a future economic roadmap of the government.
The increase in FDI in defense sector would open the doors to several foreign players in having a local existence with full domestic management under the FIPB route. Increasing the composite FDI cap in the insurance sector from 26 to 49 percent & offering full management control through FIPB route will pave way for expansion of the sector which has struggled to flourish and consolidate for lack of adequate investments. With the announcement of FDI in manufacturing sector the Finance Minister has underlined the Government’s role in focusing on offering incentives for small manufacturers and MSMEs in order to promote entrepreneurship. Although India has faced recent headwinds but the economy is slowly regaining momentum, with both domestic and external conditions starting to improve. Favorable demographics and recent government reforms are expected to accelerate expansion over the medium term, making India the world’s fifth-fastest growing economy by 2015.