India has slipped by three notches to 11th position in the FDI Confidence Index 2018 of global consultancy firm A T Kearney.
The AT Kearney Foreign Direct Investment (FDI) Confidence Index, created in 1998, is an annual survey of the business executives that ranks countries which are likely to attract the most FDI in the next three years.
The Index is calculated as a weighted average of the number of low, medium and high responses to questions on the possibility of making a direct investment in a market over the next three years.
The United States (US) topped the index, followed by Canada at 2nd and Germany at the 3rd place.
China falls three spots to 5th place this year, the lowest ranking of the country in the history of the Index.
Switzerland and Italy entered the top 10 for the first time in more than a decade, pushing out India and Singapore to 11th and 12th spots, respectively.
Only four emerging markets appear among the top 25 countries for FDI intentions- China, India, Mexico, and Brazil.
The newcomers to the Index are all European countries- Denmark (20th), Portugal (22nd) and Norway (23rd).
The countries, that appeared on the 2017 Index but do not appear this year, are all emerging markets: Thailand, the United Arab Emirates and South Africa.
India was ranked 11th, down from 8th in 2017 and 9th in 2016.
Fall in India’s rankings may be due to teething troubles in the implementation of goods and services tax (GST) and Government’s demonetization decision in 2016.
These policies may have deterred investors in the short term as they have disrupted business activity and weighed on economic growth
Several of India’s reforms such as removing Foreign Investment Promotion Board (FIPB) and liberalizing FDI limits in key sectors such as retail, aviation, and biomedical industries have maintained India’s high rankings in terms of FDI attractiveness.
In future, potential investors are likely to be cautious as they are monitoring political risks such as China abolishing presidential term limits and upcoming general election in India. But for the sheer size of Chinese and Indian markets, will continue to be drawn for investors and they will remain highest-ranking emerging markets on the index.