A new survey by the London-based Commonwealth Business Council (CBC) has revealed that India is the most reformed among emerging markets due to the economic reforms undertaken by the government.
According to the CBC's biennial Business Environment Survey 2007, the availability of free-flowing funds for investment from countries such as India and China means access to finance is no longer a critical issue for developing countries.
Commenting on the findings, CBC director Mohan Kaul said, "India's economic reforms are taking place on various fronts, ranging from privatisation, deepening the financial sector, tax reform and pricing of goods and commodities.
"The Rangarajan Committee on Pricing and Taxation of Petroleum Products proposed eliminating subsidies on petrol and diesel, and in turn the government reduced customs duty for both commodities from 10 percent to 7.5 percent. The reduction is part of an initiative to reduce government spending.
"Also, more effort is being put into improving the business environment, also by linking it to education reform which will see a better educated labour force. At the same time, poverty reduction will be linked to promotion of agricultural growth for rural populations. These are excellent moves."
The survey found that the Indian corporate sector had become more externally focused, acquiring foreign firms. Indian companies were acquiring companies in advanced economies as a way of gaining access into certain markets and also to pursue technology transfer.
The survey added that the business environment in India, with its low leverage, enabled companies with high profitability to easily acquire the finances necessary for buyouts, unlike in East Asia where leverage was high.
It identified the favourable factors that made this new boom of overseas acquisitions attainable as: international efficiency of manufacturing companies and low production costs.
Respondents to the survey highlighted five indicators which had improved compared to the 2005 survey. These included a better future outlook, corporate governance, human resources, financial architecture and business friendly tax policies.
On the whole, respondents acknowledged that this was an exciting period for businesses that were competitive. They noted remarkable improvements in telecommunications and the growth in most sectors of industry as positive developments.
The respondents urged for more openness and accountability and indicated that with an efficient judiciary, problems of corruption could be addressed. Many agreed that infrastructure needs including roads, power and underdevelopment in rural areas needs to be looked into. Problems of counterfeiting and complex tax laws were also raised.
The survey concluded that financial stability had improved since 2002 and the Congress Party-led government had made reform of the financial system one of its leading priorities.
In June 2007, India announced its intention to raise USD 450 billion for infrastructure over a five-year period. Bilateral deals with Japan were expected to result in technological and financial support for the Delhi - Mumbai and the Delhi - Calcutta freight corridors, the survey noted.
The ICT sector and telecommunications were seen as the fastest growing in the region. In 2005, there were 49.75 million fixed telephone lines in use and 69.193 million mobile cellular subscribers. Mobile subscribers were now being added at the rate of 8 million per month, the fastest rate in the world.
The CBC's recommendations to attract investment and provide a favourable environment for business include: investing more in poverty alleviation through education and health; improving infrastructure, particularly rehabilitation of roads and access to energy sources; reviewing tax with a view to reducing complexity and ensuring consistent policies; and fast-tracking privatisation to improve efficiency of services.