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Why India is a favorable Investment destination?

  • 22 December, 2020

  • 7 Min Read

Why India is a favourable investment destination?

India today is considered to be one of the major forces in the global economic market. Though India is a developing economy, its economy has a major impact on global trading.

The majority of the world's leading developed nations are keen to have or expand their ties with India. This is mainly because in the current scenario of globalization India is seen as a wonderland for investments. Thanks to its huge market base and fast-developing spending habits of middle-class Indians, India is a preferred destination for investors over other major countries, including China, because India has a favourable business environment, a good administrative setup, attractive foreign policies, and an available, abundant skilled workforce as well as provide attractive incentives to investors.

India scores over other places in terms of being an ideal destination for investments mainly due to its vibrant democratic setup, which is aptly underpinned by a broad legal framework and independent judicial system.

Apart from these factors, the presence of a vast network of bank branches, financial institutions, and a well-organized capital market contribute to making India a preferred destination over other places by foreign investors.

India boasts a vast network of technical and management institutions that are of the highest international standards. These institutions develop excellent human resources. India also has a strong base of an English-speaking population for business purposes. The strategic location of the country in the context of the third world market in the rapidly growing southeastern Asian markets along with a supportive infrastructure provides India with a competitive advantage over other countries in attracting foreign investments. 

The main reason for foreigners to invest in India more than in any other country is that India has the knack to produce quality goods and services and provide top-class services at a lower cost.

Labour costs in India rise every year and in certain fields, such as software, employees feel they will not get any further increment on their salaries. This plays a crucial role in protecting the cost benefits of foreign investors and attracts foreign firms to invest in India.

Today, there is hardly any big company in the world that does not have a presence in India in one or another way. Several companies outsource their accounts and BPO operations to India. This is mainly because regardless of the domestic issues, these companies get excellent service and value for the money they invested.

Political stability and predictable policies framework are key driving forces for investors and these factors have made India an attractive investment destination in the world.

Challenges in making India a favourable Investment destination

India’s financial sector faces certain challenges that hold it back from becoming a preferred destination for global investors even though reforms have made the domestic capital market more vibrant and transparent, the Economic Survey said today.

The performance of the domestic financial sector will depend on both short-term and long-term factors such as the risk perception of investors said the Economic Survey for 2012-13 tabled in Parliament.

"...there are still certain challenges in the development of the Indian financial sector which need to be addressed to make it an important avenue for productive channelisation of savings by domestic investors and a preferred investment destination for international investors,” it said.

India has been a late starter in initiating reforms in the financial markets, which began in the 1990s.

"...the country now has one of the most vibrant and transparent capital markets in terms of market efficiency, transparency and price discovery process,” the report said.

The Survey said that economic and political developments in the eurozone and the United States impacted domestic and other markets.

“In the short run, factors like the expectation of higher relative returns, risk perception of investors and global liquidity will decide the level of flow of funds to the domestic equity market,” it noted.

Other Factors Affecting Investment in India are

  1. The regulatory framework Policy Is inadequate
  2. Issues in the Wage rates and Labour skills
  3. Tax rates
  4. Transport and Infrastructure
  5. International impacts on India
  6. Coronavirus impact

Source: TH


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