India emerging as preferred investment destination

India emerging as preferred investment destination

Dubai - Country among few bright investment spots with right government policies on offer.

By Sandhya D'Mello

Published: Fri 2 Oct 2015, 12:00 AM

Last updated: Sat 3 Oct 2015, 10:05 AM

India is emerging as a next preferred investment destination as it tries to break from the BRIC - Brazil, India, Russia and China - basket and offers investors comparatively a more safer haven then its peers. More measures are now adapted at base level in India as the Prime Minister Narendra Modi flaunts India as a brand on global map striking business deals across the globe.
Earlier this week, Dr Surajit Mitra, director and vice-chancellor of Indian Institute of Foreign trade, or IIFT, who was here on visit to Dubai to open IIFT's third International Trade Conclave, said: "Bilateral trade between India and the UAE, which was valued at $180 million per annum in the 1970s, crossed $59 billion for the year 2014-2015. In this context, it is important to note that the shale gas production in the US shifted Gulf countries economic focus towards emerging markets. Asia has emerged as the most important trading partner of GCC countries both in terms of exports of Hydrocarbons and imports of machinery and manufactured products. At the same time, India has also taken major strides in diversifying its export markets in the past few years. There is a shift in India's trade share from traditional markets in advanced countries to new markets in the emerging economies. The share of India's exports to Europe and North America has declined since 2005, while those to Africa, Asia?Pacific and Latin America and Caribbean have registered moderate to high increase during the corresponding period. These shifts in export markets reflect the emerging export opportunities for India in UAE, which not surprisingly, is India's third largest trading partner for the year 2014-15 after China and US."
The growing trade and investment ties between GCC and India is expected to be further strengthened in coming years boosted by the recent visit Modi to UAE. A target set by India and the UAE during the Prime Minister's visit is aimed at increasing trade by 60 per cent in the next five years. The two countries have also agreed on enhancing UAE investment in India, including establishment of the UAE-India Infrastructure Investment Fund, with an aim to reach a target of investment worth of $75 billion in India. India is also looking at resuming Free Trade Agreement, or FTA, talks with the six-nation Gulf Cooperation Council, or GCC, of which the UAE is a member.
Asked if India would be the next investment destination since it remains most insulated among other BRIC countries, Mitra said: "'Make in India' initiative launched in September 2014, envisages India as a global manufacturing hub. India's appeal lies in its strong domestic market - with 1.2 billion people and a middle-class population of close to 400-500 million, skilled manpower and competitive labour market. To a foreign investor, India represents on one hand, an economic opportunity driven by a strong domestic market, and on the other hand, a hub for manufacturing to meet international demand. Therefore it can't be out of place to mention that India has emerged the most favoured destination for investment in the world."
It may be recalled a major happening in 2014 has been the significant fall in oil prices which declined by about 50 per cent in US dollar terms since September 2014 against a backdrop of weaker demand and buoyant supply in North America. Commodity prices, which are more volatile than oil prices, have also declined but considerably less than that of oil. The uncertainty in China as reflected in significant slowdown in China's economic growth prospects over the past one year (from 7.8 percent in 2013 to 7.4 percent in 2014 and expected to decline further to 6.8 percent this year) and the recent yuan devaluation by the Central Bank of China, contributed towards a passive growth forecasting emerging market and developing economies.
So while India is adopting measures to boost foreign inflows it is also touted as the most preferred safe haven among the global investors.
Nitin Jain, CEO, Global Asset & Wealth Management, Edelweiss Group, said: "Currently India is in a very sweet spot in terms of growth and potential for invesments creating lot of opportunities, hence we are looking for local partners in UAE and help them invest in India. Historically we weere very strong in Europe and US but now we have also decided to deploy more resources in Middle East and South East Asia. Globally where economies are struggling with key economic drivers, India is probably among few bright spots and with right government policies, next eight to 10 years could be the golden period."
According to a recent research report by Edelweiss, the Capital flows - Foreign Direct Investments and Non Resident Indians, or NRI, deposits - are healthy, while net capital flows for the quarter stood at $17.6 billion and in fourth quarter of fiscal year 2015 was at $31.7 billion led by FDI and NRI deposit flows while portfolio flows and External Commercial Borrowings, or ECB, were weak. The FDI inflow remained robust at $10.3 billion - highest since the Lehman crises.
Similarly, NRI deposits stood at $6 billion were significantly higher than the past Five-quarter's average of $3.5 billion. On the other hand, within portfolio investments, weakness was more on the debt front with debt outflow of $2.7 billion during the quarter. With this, overall Balance of Payment, or BoP, added $11 billion to reserves, marking the seventh successive quarter of BoP surplus.
The report further states that current account deficit, or CAD, for first quarter for fiscal year 2016 remained contained at $6 billion - 1.2 per cent of GDP - this was higher than $1.5 billion in fourth quarter of fiscal year 2015. The widening of deficit was due to seasonal factors and also poor merchandise and services exports (down 17 per cent and zero per cent year-on-year). Though agri commodities and petro products spearheaded the exports dip, manufactured exports were weak as well. Imports too continued to contract with weakness in non-oil and non-gold imports. On the capital flows side, there was net inflow of $18 billion, with strong FDI and NRI deposits. However, net portfolio flows (especially debt) were negative during the quarter. Overall, BoP remained healthy with $11 billion (2.2 per cent of GDP) added to reserves. Going ahead, Edelweiss expects CAD to remain benign, but global uncertainties could keep capital flows volatile.

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