Bright FDI, competitiveness indicators show Narendra Modi magic is working

Two international data that came out in the last two days show that India is well on the revival track.

The first one is on greenfield foreign direct investment (FDI) in the first half of 2015 (January to June) compiled by business daily Financial Times's (FT) data service arm fDi Markets, which reveals that India attracted highest FDI of $31 billion during this period, zipping ahead of even the US ($28 billion) and China ($27 billion). India was at fifth position last year with its full year FDI coming at $24 billion.

"With its (India's) economic growth outstripping that of most of its rivals and bucking a downward trend among emerging markets, India is in pole position to pass both China and the US in the FDI league tables this year. With mid-year data on greenfield FDI now in, 2015 looks to be a milestone year for India following its impressive performance in 2014," stated the FT report.

The second is a report on Global Competitiveness Index (GCI) 2015-16 rankings published by World Economic Forum that has seen India jump 16 places to reach 55th position from 71st position.

Clearly, these data indicate that India is an outlier. So, what has put India in the bright spot in the global arena?

Most economists believe that a lot of the positive sentiment on India was due to the confidence that the new government, led by Prime Minister Narendra Modi, instilled in the investors.

Anis Chakravarty, senior director, Deloitte India, said the current government was marketing its investment programmes and initiatives very well, along with taking measures to improve business environment and macroeconomic condition in the country. All this, he said, had led to a positive sentiment among overseas investors.

Chakravarty feels frequent foreign trips of Modi were also helping in bringing investments into India.

He said, domestically too, Foreign Investment Promotion Bureau (FIPB) has been very swift in handling FDI proposals. Furnishing statistics, the Deloitte economist said that last Thursday it took up 30 proposals and had cleared 80 proposals till now.

"Programmes such as Make in India, Digital India, Modified Special Incentive Package scheme (M-SIPS) and others were creating a positive buzz globally. India's marketing story has been good, irrespective of the delay in tax and labour reforms, red tape and other such issues, which can be better handled," said Chakravarty.

According to him, India's efforts on opening up sectors could also have helped in improving its competitiveness index and FDI inflows.

"Today, if you see, foreign investments in most sectors are through automatic route. Defence has a 49% FDI cap but indications are that it could be hiked or waived off completely," he said.

Dhiraj Mathur, partner, PricewaterhouseCoooper (PwC), also felt this government was taking "incremental" steps to improve regulatory regime and ease-of-doing-business that was boosting investor confidence.

"Incremental stuff has been done across ministries (by this government). Also, it is visible that the government is making efforts to improve the business environment and strengthen the economic fundamentals," he said.

Mathur said even though the big bang reforms were yet to come, the government had harvested the low hanging fruits.

Both Chakravarty and Mathur said externally too, the emerging scenario was working in favour of India.

"Externally, a lot of favourable things have happened that have worked in favour of India. Easing of global oil prices, China's sluggish growth, Europe crisis and other recent global development have created a happy situation for India," said Mathur.

Chakravarty said India's GDP growth of 7% (in the first quarter of the current fiscal) was among the best compared with most economies, which were growing at a much slower pace.

"India's stable and improving macro-economic numbers is making investors look towards it. They feel, here is an emerging economy that is a shining global destination," he said.