10 factors that attract foreign investors to India

According to an Ernst & Young survey, while India has been one of the leading destinations for shared services, it is rapidly emerging as a manufacturing location for many foreign corporations.

By 2020, 25 per cent of survey respondents see India among the world's leading three destinations for manufacturing.

So, what do investors seek in India? Ernst & Young has found 10 factors that foreign investors find most attractive while deciding to invest in India.

Let's have a look at these aspects.

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1. High potential of domestic market

Factor that investors find attractive: 50 per cent

The recent FDI data mirrors the emergence of manufacturing for FDI. In 2011, 78 per cent of investment in terms of value went to the manufacturing sector in comparison to 14 per cent for shared services.

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2. Cost competitiveness

Factor that investors find attractive: 45 per cent

This is despite the fact that in terms of number of projects, 54 per cent of FDI projects were related to services and 34 per cent were manufacturing-led.

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3. Access to highly qualified workforce

Factor that investors find attractive: 25 per cent

Underscoring the potential in the domestic market, 35 per cent of the companies surveyed nominated India as an attractive destination for domestic manufacturing and 21 per cent as an attractive base for manufacturing for the global market.

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4. Demand-driven growth model

Factor that investors find attractive: 23 per cent

When investing in manufacturing projects in India, investors tend to target the industrial machinery, equipment and tools (115 projects) and the automotive (76 projects) sectors.

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5. High productivity

Factor that investors find attractive: 15 per cent

About 65 per cent of the respondents believe that an improvement in quality of logistics and transportation will accelerate India's attractiveness as a destination for manufacturing.

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6. Leading location for manufacturing facilities

Factor that investors find attractive: 13 per cent

Investors show strong confidence in India to maintain this performance in the long term. Only 11 per cent of the survey respondents see India being surpassed by more dynamic countries.

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7. Support for innovation

Factor that investors find attractive: 12 per cent

Twenty-nine per cent believe that India will continue to experience rapid growth in the coming years.

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8. Political stability

Factor that investors find attractive: 8 per cent

Investors are also more demanding. They want to secure their investments in easily accessible (63 per cent) and predictable business climates with FDI-friendly regulatory environments (62 per cent).

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9. Ease of doing business

Factor that investors find attractive: 2 per cent

Indian business conditions raise concerns among global leaders. The survey respondents believe that improving infrastructure network (76 per cent) and better governance and transparency system (60 per cent) will have a high impact on India's attractiveness.

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10. Importance of CSR initiatives

Factor that investors find attractive: 1 per cent

In the long term, investors highlight innovation as a challenge for India. Forty-three per cent of investors think that it needs to improve the quality of its labs and research institutions.

More specifically, 38 per cent of investors cite distance between research institutions and corporations as a roadblock to developing new products in the country.