India Ready to Get the World's Money; Foreign Investors Looking Past China to the Rising Democracy
Byline: John Zarocostas, THE WASHINGTON TIMES
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. …