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India ready to get the world's money
By John Zarocostas
Washington Times, DC
November 2, 2007
GENEVA -- For many years, the world's largest democracy, India, watched frustrated from the sidelines as well-heeled foreign investors injected tens of billions of dollars of capital each year into communist China's economic miracle under way next-door but not anymore.
Although China with its powerhouse economy and double-digit growth rates remains the top investment destination in Asia and in the developing world, its southern neighbor, India, is now seen with a more favorable eye in many boardrooms around the globe.
Last year, India attracted a nearly threefold increase in foreign direct investment to $16.8 billion, compared with $6.6 billion in 2005 and $5.7 billion in 2004, according to a new report by the U.N. Conference on Trade and Development (UNCTAD).
"Rapid economic growth has led to improved investor confidence in the country," says UNCTAD's world investment report for 2007.
A series of long overdue structural reforms are rapidly transforming India into a formidable player in many spheres of the world economy from traditional manufacturing to high-tech services.
The economy, which has in recent years posted growth rates of between 6 percent to 8 percent, is estimated by the Indian government to grow by 9.2 percent for fiscal 2006-07.
New Delhi is aiming for a growth rate of 10 percent by 2011, which Western economic think tanks, including the Paris-based Organization for Economic Cooperation and Development, say is achievable if the recent pace of reforms continues.
As in China, the big draw is India's massive and lucrative domestic market potential and its rapidly growing middle class, analysts say.
Moreover, India is also projected to overtake China to become the world's most populous nation by 2050.
According to the United Nations' 2007 world population report, India's population is forecast to reach 1.6 billion, up from today's 1.1 billion, and China's to increase to 1.4 billion, up from the 2007 level of 1.3 billion.
The UNCTAD report points out that U.S. multinational corporations such as Wal-Mart have entered the Indian market and that others such as General Motors and IBM "are rapidly expanding their presence."
Other global corporations are also lining up deals for a slice of the action.
Last year, POSCO, a South Korean steel producer, announced that it would invest $12 billion in a steel plant, and Japan's Suzuki Motor Corp. announced an expansion plan of $1.65 billion that will bring its annual automobile production capacity in India to 1 million, according to the UNCTAD report.
But investment specialists also emphasize that India still has a way to go before it can match China, which embarked on market-oriented reforms that included an overhaul of its command economy in the late 1970s.
Looking ahead, UNCTAD analysts expect the strong trend in foreign investment in India to continue the upward trend in the short term and surge in the long run.
Supachai Panitchpakdi, UNCTAD secretary-general, told The Washington Times that many Indian industries from steel to automobiles and auto parts are now "more geared to the global economy."
Mr. Supachai, a former deputy prime minister of Thailand, said that South Asia's largest emerging market was increasingly more integrated with the global economy and that Indian reforms under way are likely to increase the integration.
In 2006, India's merchandise exports grew 21 percent to $120 billion and its imports grew 25 percent to $174 billion, according to World Trade Organization data.
Seasoned investment bankers active in both of the world's biggest emerging economies say one attraction is India's large pool of English-speaking, skilled, price-competitive labor force.
On the downside, India still has a large rural poor population of subsistence farmers, many urban poor and millions who are severely hindered from breaking out of the cycle of mass poverty by deeply entrenched discriminatory social norms.
The country also has massive infrastructure needs and even greater social challenges, including high malnourishment especially among children; low levels of adult literacy among women; and poor access to drugs and affordable health services.
The U.N. Food and Agriculture Organization estimates that from 2001 to 2003, about 212 million people or about 20 percent of the Indian population at the time were undernourished.
Still the UNCTAD report anticipates continued global foreign investment, which in 2006 was partly driven by increases in cross-border mergers and acquisitions, higher stock prices and re-invested earnings.
"Inflows in 2007 are forecast to reach $1.4 to $1.5 trillion, which would imply a new record level," it predicts.
UNCTAD's chief for investment analysis, Anne Miroux, said the agency projects an overall increase in foreign investment flows destined for developing countries, especially in Asia.
UNCTAD predicts that rapid growth in Asia is likely to continue, "underpinned by the strong performance of China and India." Ms. Miroux added that markets seeking investment to the region "should keep pace with rapid economic growth in the next few years."
In 2006, foreign investment to Asia increased by 19 percent to a new high of $200 billion and accounted for more than half of $379 billion in investment to developing countries and transition economies.
China was the biggest recipient, ahead of Hong Kong, Singapore, and India.
But inward investment to China fell for the first time in seven years by 4 percent to a still very respectable $69 billion. The decrease was mainly due to a drop in financial-services investments. Hong Kong reached $42.8 billion, up from $33.6 billion the year before, and Singapore attracted $24 billion, up from $15 billion.
In 2006, foreign investment inflows to rich industrialized countries rose by 45 percent to $857 billion, with the United States the world's top destination with $175 billion, up from $101 billion the previous year, followed by the United Kingdom, with $139.5 billion, and France, with $81 billion.
By John Zarocostas
Washington Times, DC
November 2, 2007
GENEVA -- For many years, the world's largest democracy, India, watched frustrated from the sidelines as well-heeled foreign investors injected tens of billions of dollars of capital each year into communist China's economic miracle under way next-door but not anymore.
Although China with its powerhouse economy and double-digit growth rates remains the top investment destination in Asia and in the developing world, its southern neighbor, India, is now seen with a more favorable eye in many boardrooms around the globe.
Last year, India attracted a nearly threefold increase in foreign direct investment to $16.8 billion, compared with $6.6 billion in 2005 and $5.7 billion in 2004, according to a new report by the U.N. Conference on Trade and Development (UNCTAD).
"Rapid economic growth has led to improved investor confidence in the country," says UNCTAD's world investment report for 2007.
A series of long overdue structural reforms are rapidly transforming India into a formidable player in many spheres of the world economy from traditional manufacturing to high-tech services.
The economy, which has in recent years posted growth rates of between 6 percent to 8 percent, is estimated by the Indian government to grow by 9.2 percent for fiscal 2006-07.
New Delhi is aiming for a growth rate of 10 percent by 2011, which Western economic think tanks, including the Paris-based Organization for Economic Cooperation and Development, say is achievable if the recent pace of reforms continues.
As in China, the big draw is India's massive and lucrative domestic market potential and its rapidly growing middle class, analysts say.
Moreover, India is also projected to overtake China to become the world's most populous nation by 2050.
According to the United Nations' 2007 world population report, India's population is forecast to reach 1.6 billion, up from today's 1.1 billion, and China's to increase to 1.4 billion, up from the 2007 level of 1.3 billion.
The UNCTAD report points out that U.S. multinational corporations such as Wal-Mart have entered the Indian market and that others such as General Motors and IBM "are rapidly expanding their presence."
Other global corporations are also lining up deals for a slice of the action.
Last year, POSCO, a South Korean steel producer, announced that it would invest $12 billion in a steel plant, and Japan's Suzuki Motor Corp. announced an expansion plan of $1.65 billion that will bring its annual automobile production capacity in India to 1 million, according to the UNCTAD report.
But investment specialists also emphasize that India still has a way to go before it can match China, which embarked on market-oriented reforms that included an overhaul of its command economy in the late 1970s.
Looking ahead, UNCTAD analysts expect the strong trend in foreign investment in India to continue the upward trend in the short term and surge in the long run.
Supachai Panitchpakdi, UNCTAD secretary-general, told The Washington Times that many Indian industries from steel to automobiles and auto parts are now "more geared to the global economy."
Mr. Supachai, a former deputy prime minister of Thailand, said that South Asia's largest emerging market was increasingly more integrated with the global economy and that Indian reforms under way are likely to increase the integration.
In 2006, India's merchandise exports grew 21 percent to $120 billion and its imports grew 25 percent to $174 billion, according to World Trade Organization data.
Seasoned investment bankers active in both of the world's biggest emerging economies say one attraction is India's large pool of English-speaking, skilled, price-competitive labor force.
On the downside, India still has a large rural poor population of subsistence farmers, many urban poor and millions who are severely hindered from breaking out of the cycle of mass poverty by deeply entrenched discriminatory social norms.
The country also has massive infrastructure needs and even greater social challenges, including high malnourishment especially among children; low levels of adult literacy among women; and poor access to drugs and affordable health services.
The U.N. Food and Agriculture Organization estimates that from 2001 to 2003, about 212 million people or about 20 percent of the Indian population at the time were undernourished.
Still the UNCTAD report anticipates continued global foreign investment, which in 2006 was partly driven by increases in cross-border mergers and acquisitions, higher stock prices and re-invested earnings.
"Inflows in 2007 are forecast to reach $1.4 to $1.5 trillion, which would imply a new record level," it predicts.
UNCTAD's chief for investment analysis, Anne Miroux, said the agency projects an overall increase in foreign investment flows destined for developing countries, especially in Asia.
UNCTAD predicts that rapid growth in Asia is likely to continue, "underpinned by the strong performance of China and India." Ms. Miroux added that markets seeking investment to the region "should keep pace with rapid economic growth in the next few years."
In 2006, foreign investment to Asia increased by 19 percent to a new high of $200 billion and accounted for more than half of $379 billion in investment to developing countries and transition economies.
China was the biggest recipient, ahead of Hong Kong, Singapore, and India.
But inward investment to China fell for the first time in seven years by 4 percent to a still very respectable $69 billion. The decrease was mainly due to a drop in financial-services investments. Hong Kong reached $42.8 billion, up from $33.6 billion the year before, and Singapore attracted $24 billion, up from $15 billion.
In 2006, foreign investment inflows to rich industrialized countries rose by 45 percent to $857 billion, with the United States the world's top destination with $175 billion, up from $101 billion the previous year, followed by the United Kingdom, with $139.5 billion, and France, with $81 billion.