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After a spate of bad news on the Indian economy, there is finally something to cheer about. Global consultancy firm Ernst & Young (EY) has said that India is the most attractive investment destination, ahead of China and the US, after the government recently relaxed the policy on foreign investment.
The government had in August announced relaxation of foreign direct investment (FDI) norms in several sectors that such as multi-brand retail and telecom.
“With sharp currency depreciation and opening up of FDI in various sectors, India has become an attractive destination for foreign investors,” EY said in its report, Capital Confidence Barometer. This report is based on a survey of 1,600 senior executives in more than 70 countries.
The report highlighted automotive, technology, life sciences and consumer products as sectors in which deals are likely to be high. Due to the present macro-economic pressures and heavy debt pile, several Indian companies are looking to divest non-core businesses, it added.
“This has created a large opportunity for foreign players vying for a greater role in the Indian market,” it said. The top three investing countries into India are the US, France and Japan. FDI from these three countries from April 2000 to August 2013 amounted to Rs. 53,673 crore, Rs. 17,718 crore and Rs. 71,870 crore respectively.
The survey said 38% of the respondents felt merger and amalgamations volume in India would improve over the next twelve months, while 30% believe it would remain stable.
“After two years, European countries (Britain and Germany) have made a comeback on the potential investment destinations list for Indian companies,” the report said. Sentiments have improved, specifically on acquisitions and merger plans, it said, adding that these are at a two-year high with credit and cash available.
“The investor outlook for India remains positive, despite challenges in the recent past. At the same time, the improved condition of the world economy has helped increase confidence amongst deal makers, prompting them to take a bolder stance toward transactions,” said Amit Khandelwal, a national leader at EY.