India, the world’s second most populous country, does have a lesson for Africa’s most populous nation on how to be a popular destination for Foreign Direct Investment (FDI) that can boost growth rates and reduce poverty.
Data obtained from India’s Department for Promotion of Industry and Internal Trade (DPIIT) showed that the country received $42.5 billion in FDI during January-September 2022, a sharp contrast from Nigeria’s FDI of $468 million for the whole of last year.
“India is the preferred investment destination due to series of measures such as liberalisation in the FDI policy, steps to further promote ease of doing business, reducing compliance burden for industry, rollout of the production linked incentive schemes and theNational Master Plan for integrated infrastructure development,” Anurag Jain, secretary at DPIIT, said.
“Development of the National Single Window System portal is completely changing the way businesses used to seek approvals and it will also help investors to come to India,” Jain said, adding that free trade agreements with the United Arab Emirates (UAE) and Australia too would help attract healthy FDI inflows in 2022-23.
Rumki Majumdar, an economist at Deloitte India, said the country’s relatively better performance and strong growth outlook would help it stand out as an investment destination.
She said that FDI from the United States has dried up, but there is a healthy rise in the equity inflows from Japan, Singapore, the United Kingdom, and the UAE in the first half of 2022-23.
“This shows that there is a rising confidence among global investors to invest in India and India’s inflows are becoming more diversified,” she told CNBC.
Kartik Ganapathy, a founding partner at Induslaw, an Indian law firm, said the country’s growth appeared to be driven by a positive increase in domestic consumption, growth of services and the digital economy, and increased infrastructure spending.
“In this backdrop, India remains an attractive destination for investment,” Ganapathy added.
A report by the Confederation of Indian Industries (CII) and Ernest Young showed that even as the pandemic and geopolitical conflict resulted in investor uncertainty, India has the potential to attract FDI flows of $475 billion in the next five years due to the focus on reforms and economic growth.
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“India is seen as an emerging manufacturing hub in global value chains, as a growing consumer market and as a hub for ongoing digital transformation. In addition, in a rapidly changing geopolitical environment, India’s large and stable democracy and consistent reform measures are recognized by the MNCs (multinational companies),” the report said.
The report, titled ‘Vision—Developed India: Opportunities and Expectations of MNCs’, added that 71 percent of MNCs working in India consider the country an important destination for their global expansion. The optimism is driven by both short-term as well as long-term prospects.
“A majority of MNCs feel that the Indian economy will perform significantly better in 3-5 years backed by 96percent of respondents being positive about overall India’s potential,” the report said.
The confidence in India’s potential, according to the report, stems from strong consumption trends, digitisation and a growing services sector, along with government’s strong focus on infrastructure and manufacturing. The Indian government’s consistent efforts to reduce regulatory barriers is also stoking the positive perception among MNCs, it said.
Over 60 percent of MNCs in the report stated improvement in the business environment in the last three years.
“As continuing improvement in business environment, MNCs would like to see enhanced effectiveness of the national single window for approval/clearances; greater tax certainty, and stronger contract enforcement mechanism, among other measures,” it said.
Experts say the many challenges with doing business in Nigeria are scaring foreign investors away from Africa’s most populous nation. That has coincided with the race by other African countries to attract investment. These smaller countries relative to Nigeria are offering investors more than Nigeria is willing to and are therefore stealing a march on the so-called ‘giant of Africa’.
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