India has potential to attract USD 475 billion through FDI in 5 years: CII-EY report

India has optimistic growth prospects for foreign investments with a potential to attract FDI flows of USD 475 billion in the next 5 years, according to a CII-EY report.

Foreign Direct Investment (FDI) in India has seen a consistent rise in the last decade, with FY2021-22 receiving FDI inflows of USD 84.8 billio, despite the impact of the pandemic and geopolitical developments, it highlighted.

The report revealed that 71 per cent of Multi-National Companies (MNCs) working in India consider the country as an important destination for their global expansion.

The optimism is driven by both short-term and long-term prospects.

A majority of MNCs feel that the Indian economy will perform significantly better in 3-5 years, with 96 per cent of respondents being positive about the country's overall potential, according to the report titled 'Vision - Developed India: Opportunities and Expectations of MNCs'.

"Against the backdrop of growth challenges being faced by major economies of the world and new geopolitical issues, it is heartening to note that MNCs consider India an attractive investment destination and are planning expansion.

"We are confident that the continuing reform momentum by the Government will attract increasing volume of investment from MNCs and facilitate their larger integration in domestic supply chain," said Chandrajit Banerjee, Director General, CII.

According the report, the direction of India's growth is being determined by the strong momentum in domestic consumption, services, digital economy, and infrastructure.

The estimated real growth in consumption is the third highest behind only the US and China, while the fast-expanding digital economy is expected to reach USD 1 trillion by 2025.

Besides the fact that India is among the fastest-growing large economies in the world, the confidence in its potential stems from strong consumption trends, digitisation and a growing services sector, along with the government's strong focus on infrastructure and manufacturing, the report shared.

Significantly, over 60 per cent of MNCs stated improvement in the business environment in the last three years. MNCs appreciate the impact of GST, the government's digital push in various spheres, and transparency in taxation, amongst other reforms, it added.

As continuing improvement in business environment, MNCs would like to see enhanced effectiveness of the national single window for approval / clearances; greater tax certainty, and stronger contract enforcement mechanism, among other measures, said the report.

What also makes India an attractive investment destination for MNCs, besides the consistent reform measures, is it being a large and stable democracy.

Majority of the respondents also see India as an alternative for their China+1 strategy.