New Delhi, Sept. 24: India has fallen from the position of the seventh most attractive foreign direct investment destination in the world to the 15th — which translates into a 20 per cent decline in the likelihood of receiving FDI.
An FDI Confidence Index prepared by A.T.Kearney shows that the simmering conflict with Pakistan over Jammu and Kashmir coupled with poor infrastructure has made India less attractive despite estimates which suggest the country will maintain an over 5 per cent economic growth rate.
However, India’s attractiveness has improved in non-financial services, which implies an increase in investment likelihood by 28 per cent. Other than information technology related services, investors in other sectors including telecom consider India as their 25th most attractive destination.
China has overtaken the US as the most attractive FDI destination. Corporate scandals, stock market volatility and slow economic recovery forced the US into the second slot.
Investors are no longer interested in mergers and acquisitions. “The overall interest to invest has fallen after the September 11 attacks last year. The attitudes are yet to be restored to that level. The softening of investor attitudes toward mergers will end a period of economic expansion and the beginning of a period of corporate retrenchment,” the study says.
The other attractive destinations remained the UK, Germany, France, Italy and Spain. Russia recorded the biggest shift in investor sentiment in the index as it jumped up from 25th to 17th position. Japan also gained momentum with its highest ever ranking at 12th place.