India may see largest growth in foreign investment KPMG

The increasing importance of the economies of China, India, Russia and Brazil (BRIC), and widespread economic concerns in Europe and the US, suggest the beginning of a new phase in global economic development. In fact, global corporate investment flows are switching from the US, Japan, Singapore and some European countries to China, India, Russia and Brazil.

So far as India is concerned, it is likely to see the largest growth in its share of foreign investment overall, and should become the world leader for investment in manufacturing. India can expect its share of international corporate investment to rise by 8 per cent to 18 per cent over the next five years. It will move from seventh to fourth in the investment league table, overtaking the UK, Germany and France.

These are the findings of a just-released global survey of corporate investment plans carried out by KPMG International, a global network of professional firms providing audit, tax, and advisory services.

In the survey, corporate investment strategists from over 300 of the largest multinational companies in 15 major economies were asked where they plan to invest in the next 12 months and in five years’ time. They were also asked which countries they saw as dominant in their sector today, and which they expected to be dominant in 2013/14.

The results showed a move away from investments in the US, Japan, Singapore and the UAE, and a big increase in flows to Brazil, Russia, China and India (BRIC).

China, for instance, is expected to overtake the US as the world’s leading recipient of corporate investment in the next five years, and should become the most influential country in IT and telecoms, industrial products and mining. But the European economies are expected to keep their attraction for investors, with the UK maintaining a very strong position, especially in financial services.

Respondents also expect India to do particularly well in industrial products, where it will displace the US to take second place behind China, and in manufacturing, where it is expected to lead the world in terms of investment, with 25 per cent of corporates expecting to invest five years from now. By contrast with the other BRIC countries, in the next year, 64 per cent of the investment into India is expected to come from new entrants to the country.

In terms of influence, India is expected to achieve the remarkable feat of overtaking Japan, France, Russia and Brazil in the ranks of the most influential countries, with a rising influence in all sectors, particularly business and consumer services, IT/telecoms and manufacturing.

Indian business expects the bulk of its investment this year to go to the US (35 per cent) with 15 per cent expecting to invest in the countries of the Middle East and 10 per cent in Singapore and Hong Kong. Looking ahead, the US stays popular with 25 per cent, and the Middle East with 15 per cent, but countries of the Asia Pacific region can expect an increase in investment, with Singapore, Australia, and Malaysia the choice of 10 per cent of respondents, alongside South Africa.

Commenting on the findings of the survey, Sudhir Kapadia, Head of Tax and Regulatory Services, KPMG in India, said, “It is clear that India has the potential to play an even more influencing role in flow of capital and it’s a great opportunity for India to further improve the economic and fiscal climate and proactively attract and retain investments in her growing economy. Indeed India Rising is all set to fulfill her tryst with destiny that Nehru spoke about in his Independence speech and occupy her rightful place in the comity of nations.”

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India may see largest growth in foreign investment KPMG