India falls in AT Kearney FDI confidence index
Given that foreign investments into India fell dramatically, from $46.8 billion in FY12 to $34.3 billion in FY13 and rose a bit to $36.4 billion in FY14, it is not surprising that, as the AT Kearney Foreign Direct Investment Confidence Index shows, India’s rank has slipped badly. From being the second-most preferred country after China in 2012, India fell to the 5th slot in 2013 and 7th in 2014. Part of the fall, of course, is explained by the fact that, with the world recovering from the global financial crisis, there is a strong shift back to the OECD countries. While the US bounced back from 4th position in 2012 to the top slot in 2014, Canada rose miraculously from 20th to 3rd slot and the UK from 8th position to number 4.
There is, though, more than just that. When investors were asked what excited them the most, the Trans Pacific Partnership (TPP) trade agreement between the US, Japan and 10 other countries was one of them—this is expected to, on completion, boost US-EU GDP by around $300 billion. That is a lesson for India on how it needs to find ways to become part of a larger global trade/supply chain.
The other big finding is how the shale revolution has made the US the most sought after destination for energy-intensive sectors; indeed, the US is now the world’s second-cheapest location for chemical manufacturing. Canada’s climb back is related purely to its focus on high-tech and skilled labour. The heavy weather India is making of even raising gas prices shows it is far from getting its act together on energy, and its falling rankings in global education suggest attracting high-tech investment is a distant dream. When large shifts of this nature take place, India could very easily lose its place unless the new government is able to decisively move in the right direction.