Better business environment to attract more FDI
Arecent report from the United Nations Conference on Trade and Investment estimated that the total inflows to the leading emerging economies — Brazil, Russia, India and China, or the Bric nations — is expected to be $312 billion in 2013. These countries are expected to attract $63 bilion, $94 billion, $28 billion and $127 billion, respectively, in 2013. The other leading FDI recipients in 2013 includes the US, Hong Kong and Canada, with inflows amounting to $159 billion, $72 billion and $64 billion, respectively. According to the Indian government’s Department of Industrial Policy and Promotion, FDI inflows into the country from April to December 2013 amounted to $24.82 billion. China’s FDI levels remain far higher than India’s on account of Chinese reforms that have been much more wider and deeper than India’s, and that Chinese provinces have been competing much more among themselves to attract FDI. During April to December 2013, FDI equity inflows to India dipped by two per cent to $16.56 billion from $16.94 billion during the corresponding period of the previous year. The construction sector attracted $914 million in FDI equity inflow during that period. UAE FDI equity investment during April to December 2013 amounted to $223 million and is one of the top-investing countries for FDI equity investment to India.
The Indian economy, which has challenges such as slow growth and high inflation, should bring various measures to stimulate its infrastructure and revive its economic growth. Slow infrastructure spending in India is on account of low business confidence that is below global financial crisis levels, high gearing for infrastructure companies that impedes new asset creation, poor profitability of projects bid in the 2004-07 period, inordinate delays due to regulatory hurdles like the Land Acquisition Bill and high interest rates in times of weak economic growth. There should be reforms to assure stability of policy framework and create investor confidence. There should be efficient and clear regulations that provide clear and simple guidelines, a speedy approval process to avoid time and cost overruns and a speedy dispute resolution mechanism. There should be single window clearance to fast-track projects. Infrastructure companies should improve governance framework and transparency so as to attract global investors who can also bring their representatives on board. India should seek to attract more FDI into the infrastructure sector.
Global players can look for investment opportunities in power and coal-based generation plants in India. In March, a consortium led by Abu Dhabi National Energy Co had agreed to buy two Indian hydroelectric power plants from Jaiprakash Power Ventures in a deal worth about $1.6 billion. In December 2013, French energy company GDF Suez bought a 74 per cent stake in a coal-fired power plant in south India. In February, Singapore’s SembCorp Industries purchased a 45 per cent stake in a power project jointly-owned by NCC Infrastructure and Gayatri Energy Ventures for $139 million. In July 2013, the Indian government raised the limits for FDI in a number of sectors. In August 2013, the government came with measures where in sovereign wealth funds. or SWFs, will be allowed to invest in tax-free bonds floated by state-run infrastructure finance companies, however not much significant response received from SWFs.
India had also opened up sectors such as aviation and retail for FDI. The country has 0.66 kilometres of roads per sqkm of land, however as its population is large; India has less than four kilometres of road for every 1,000 people. Port traffic has increased at a compound annual growth rate of 8.1 per cent, up at 84.6 million tonnes, with an average utilisation of 90 per cent, as compared to the international average of 70 per cent. India, to make sustained progress, should focus to build better roads so that the transportation of goods becomes efficient and should also build ports. FDI is the key to Indian economic recovery.