In the Foreign Direct Investment (FDI) Confidence Index 2018 released by global consultant AT Kearney saw India’s ranking fall by three places. India, which was ranked 8th last year on this list, has secured 11th rank this year. It is the first time since 2015 that India has been pushed out of top 10.

However, India retained its position on the index as the second highest ranked emerging market.

Foreign Direct Investment (FDI) Confidence Index 2018

The report said that the economic reforms introduced in recent times affected India’s ranking in both positive and negative ways.

According to the report, India’s removal from the list of top 10 countries for the first time since 2015 could be attributed to implementation challenges of Goods and Services Tax (GST) which was introduced in 2017 along with demonetization announced in 2016 which rendered Rs 1000 and Rs 500 banknotes illegal. The report said, “Some policies, however, may have deterred investors—at least in the short term. The 2017 nationwide goods and services tax, for example, faced implementation challenges, and the 2016 demonetization initiative disrupted business activity and weighed on economic growth.”

On the positive side, India has held on to its position of being the second-highest ranking emerging market, which means that investors are ranking India highest in terms of their intention to invest there. The report said, “This confidence may be a result of the government’s ‘Make in India’ initiative, which aims to boost investment in India’s manufacturing sector as well as its pursuit of closer ties with the United States.”

The report noted that the high rank in terms of emerging market was due to reforms like the elimination of Foreign Investment Promotion Board, the governmental agency which was responsible for examining all potential foreign investment and liberalisation of overseas investment thresholds for the retail, aviation, and biomedical industries.

As reported by Business Standard, Vikas Kaushal, the managing director and country head of AT Kearney India said, “We are in a very exciting space of growth, opportunity and transformation. For long India has been a very exciting destination for investors. Now, especially with the current political stability and positive reforms, India will only gain attractiveness as an investment destination.”

Along with India, countries like China and Singapore ranked lower than in the previous year in the FDI Confidence Index, whereas Australia jumped to the eighth position and New Zealand, on its second year on the index, was placed at the 16th position.

About AT Kearney Foreign Direct Investment (FDI) Confidence Index

AT Kearney Foreign Direct Investment (FDI) Confidence Index was created in 1998. It is an annual survey by business executives that ranks countries in terms of their ability to attract FDI in the coming three years.

Rankings are calculated as a weighted average of the number of low, medium and high responses to questions on the possibility of making direct investment in the market.

What is FDI?

Foreign direct investment is an investment which is made by a firm or an individual of one country into business interests located in another country. Usually, FDI occurs whenever an investor acquires foreign business assets, including owning or controlling interest in a foreign company or when an investor establishes foreign business operations.