India amongst the top 3 choices for future investments - Tax cuts, Ease of Doing Business measures, other reforms top drivers

India has emerged as one of the top three choices for overseas investments in the next 2-3 years, according to the FDI survey released by the Confederation of Indian Industry (CII), in association with EY. The CII-EY FDI survey on the theme, ‘How can India step up its game?' has been brought out to gauge the market sentiment amongst the Indian as well as non-Indian MNCs.

According to the survey, more than two-thirds of the MNC respondents, India is the number one choice for future investments. 25% of the respondents, who represent non-Indian HQ MNCs, view India as the first choice for future investments. The survey shows that more than 80% of all the respondents and 71% of the non-Indian headquartered respondents plan to make investments globally in the next 2-3 years. About 30% of companies are planning to invest more than USD 500 million.

About 50% of respondents see India amongst the top three economies or leading manufacturing destinations of the world by 2025. The respondents have pinned down market potential, skilled workforce, and political stability as the top three reasons to make India their favored destination. Other key factors which contribute to the attractiveness of India as an investment destination include cheap labor availability, policy reforms, and availability of raw materials. 

Recent reforms in the country such as corporate tax cuts, Ease of Doing Business measures, simplification of labour laws, FDI reforms, and focus on human capital have emerged as the top drivers for fresh investments. Non-Indian HQ MNCs have also opined that major investment in infrastructure and 100 Smart cities as well as financial sector reforms will also help in establishing India as a favorable destination for FDI.

“The CII-EY survey results strongly indicate that India will be the next global investment hotspot with a high proportion of MNCs placing it at the top of their investment agenda. The recent major structural reforms, proactive Government processes and the quick pickup in economic activity following Unlock measures are contributing to global investor interest,” said Mr Chandrajit Banerjee, Director General, CII.

For 40% of the non-Indian HQ companies, effective implementation of labour laws and FDI reforms are very significant, while 52% of the Indian HQ companies believe corporate tax rate reduction would be the prime mover of future investments.

The survey has also brought out some key recommendations sought by the respondents. Infrastructure development, faster clearances, and proper implementation of the improved labour laws and labour availability as the top three issues that the companies want the government to focus on, followed by R&D and innovation, and tax reforms.

In terms of Trade Policy reforms, investors would like to see a faster turnaround time for exports and imports, improved cargo handling, and trade facilitation measures to be in place.

The survey assesses India’s competitiveness in terms of key parameters and analyses whether India is likely to be the “+1” jurisdiction for those seeking to relocate investments or making fresh investments.