Strategic reforms needed to enhance India's appeal to global investors: GTRI
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The Global Trade Research Initiative (GTRI) has said that strategic reforms are needed to enhance India's appeal to global investors as despite having huge potential, foreign direct investment (FDI) data shows that the country has not fully capitalised on its opportunities. Suggesting a four-step plan, the GTRI said that measures which can help India position itself as a leading choice for foreign investors include reducing cost disadvantages for companies relocating to India, improving the Ease of Doing Business throughout the business lifecycle, and establishing a framework for evaluating investment proposals. India attracted $44.4 billion in FDI in FY2024, which is only 1.1 per cent of its GDP.
GTRI said the country lagged significantly behind countries like China ($189.1 billion), Brazil ($86.1 billion) , Australia ($61.6 billion), and Canada ($52.6 billion) as noted in the World Development Report 2023. It suggested that India must offer a more competitive cost structure to attract businesses shifting from China or considering alternative production locations. For this, India needs to address the four cost-related components - labour, rate material, energy and financial costs. In India, raw material costs are higher for non-traditional productions due to import dependence and high tariffs. China benefits from lower costs due to large-scale local production and efficient supply chains, while Vietnam offers competitive costs with low or zero tariffs on imports.
To further improve the ease of doing business, the GTRI suggested the identification of priority sectors, particularly those where India's manufacturing and export capabilities are currently weak, such as electronics, computers, telecom, precision equipment, and factory machinery. Secondly, invite top global firms as anchor manufacturers. These firms can drive technological innovation and improve productivity across sectors. Additionally, it said there is a need to ensure quick factory-to-ship movement. Improving logistics through dedicated freight corridors and strategically locating industrial zones near ports will streamline port and customs processes, facilitating faster shipments. Recommending to create a framework for evaluating investment proposals, it said investments involving technology transfer must be assessed for their potential to enhance local technological capabilities, especially in high-tech areas where India aims to close gaps.
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