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India – Low labour costs still attracting foreign investment

24 January 2014

India remains one of the most attractive destinations for foreign investment, according to a survey from global consultancy agency EY (formerly Ernst and Young), reports the Hindu Business Line. The survey, entitled ‘EY India Attractiveness Survey 2014’, was conducted among 500 foreign investors.

The survey found that India remains one of the top global destinations for foreign direct investment due to its local labour costs, domestic market, and the availability of an educated workforce.

Rajiv Memani, Country Managing Partner at EY India, commented: “Investors are considering India for both their services and manufacturing supply chain, but for investments to materialise, the environment must be more enabling and measures on other competitive issues, including currency stability and ease of doing business, must be implemented.”

The supply of a large, skilled workforce, an emerging supply base, access to natural resources, and Government initiatives would all play a significant role in driving the momentum of India’s manufacturing sector.

While India’s strengths including its burgeoning middle-class, growing domestic consumption levels, and a skilled workforce were helping India strengthen its position in the global marketplace, it faces increasingly stiff competition.

The survey said, in order for India to continue to compete on this stage and realise its foreign direct investment (FDI) potential, it needs to improve its operating environment and further develop its infrastructure. Other priorities should include boosting production, improving the taxation system, easing FDI regulations, and increasing awareness about emerging cities.

According to the survey, 70.8% of the respondents think that China remains India’s main competitor for FDI. However, 8.8% of respondents indicated that new destinations; such as Indonesia, the Philippines, and Vietnam, were also emerging as competitors.

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