For investors, India is less risky than China
NEW DELHI : India continues to be less risky than China as a business destination, according to a corporate study. India has been ranked 10th among 29 emerging markets in the latest country risk analysis by Economic Intelligence Unit (EIU), an information service arm of the Economist group.
With a score of 39 out of 100 in the risk scale, India has got 'B' risk rating and has outranked China (41), Saudi Arabia (41), South Africa (45), Mexico (45), Brazil (48) and Egypt (49), who have got 'C' rating.
However, Singapore (11, A rating), Hong Kong (21) continue to be the safest place for foreign investment, followed by Taiwan (25), Israel, Hungary and Poland (37), who have qualified for 'B' rating. Not surprisingly, Iraq is the most dangerous country to do business, with a score of 91 out of 100, followed by Argentina (76).
A low risk rating is an important indicator of a country's global credit rating and the willingness of foreign investors to invest in a country. Industry representatives said India has an opportunity to gain from China 's slowdown.
Experts said country risk report comes in handy as a decision making tool for MNCs to enter or expand in new markets.
EIU country risk rankings combine measures of political risk (like threat of war) and economic risk (like size of fiscal deficits). They also include measures that affect a country's liquidity and solvency (debt structure and forex reserves). Some of the operational factors that are considered in determining country risk include security, political stability, government effectiveness, legal & regulatory framework, macroeconomic conditions, financial & tax policy, labour market and infrastructure. EIU reviews the risk ratings of over 100 emerging markets on a monthly basis.
Rapid growth, highly skilled labour and opportunities in outsourcing boosted India 's ratings. While change in government brings no decline in risk for India , EIU says that Manmohan Singh-led coalition must support reforms to sustain current ranking.
" India is watched closely by overseas investors on whether reforms will continue in the Left supported government. There is little awareness about economic policies adopted by Left in West Bengal ," says Amit Mitra, secretary general, Ficci. He said FDI investment will gather momentum. " India is as safe as what it was and change in government has not changed the situation," says N Srinivasan , DG-designate, CII. "Indian industry is upbeat and full of self-belief."
Former RBI governor Bimal Jalan is confident that the country can handle any economic crisis. Compared to China , India has become marginally safer in 2004. This perception could be partly attributed to the strong external sector performance and reduced border-tension that India experienced a year back.
EIU says that India is poised to grow at 8.3% in 2003-04 (April-March) and will grow at 7.3% in 2004-05 — owing to a "smaller harvest and hence less robust growth in personal incomes". It also predicted a slowdown in China . " China 's GDP is likely to grow by 9.4% this year and by 8.1% in 2005, with the slowdown being led by an easing of investment growth," projects EIU. India has an edge over other global competitors in outsourcing opportunities, R&D. China has scored over every country in cheap labour.
Despite slowdown, China will continue to be among top emerging markets for FDI, but India is also becoming very attractive to global investors. EIU has projected FDI flows to India to touch $13 billion in 2008 from $5 billion in 2003. However, China is forecast to receive $58 billion in FDI this year. " India 's performance as one of the most attractive destinations for FDI is based on several criteria, considering Indian authorities' commitment to attract more FDI is yet to be fully matched by more investment-friendly policies," says EIU.
CII says effective communication is key to reduce India 's risk further, saying, "The biggest challenge is spreading the right message to the global investing community." Jalan pointed out the need to reduce fiscal deficit.
NEW DELHI : India continues to be less risky than China as a business destination, according to a corporate study. India has been ranked 10th among 29 emerging markets in the latest country risk analysis by Economic Intelligence Unit (EIU), an information service arm of the Economist group.
With a score of 39 out of 100 in the risk scale, India has got 'B' risk rating and has outranked China (41), Saudi Arabia (41), South Africa (45), Mexico (45), Brazil (48) and Egypt (49), who have got 'C' rating.
However, Singapore (11, A rating), Hong Kong (21) continue to be the safest place for foreign investment, followed by Taiwan (25), Israel, Hungary and Poland (37), who have qualified for 'B' rating. Not surprisingly, Iraq is the most dangerous country to do business, with a score of 91 out of 100, followed by Argentina (76).
A low risk rating is an important indicator of a country's global credit rating and the willingness of foreign investors to invest in a country. Industry representatives said India has an opportunity to gain from China 's slowdown.
Experts said country risk report comes in handy as a decision making tool for MNCs to enter or expand in new markets.
EIU country risk rankings combine measures of political risk (like threat of war) and economic risk (like size of fiscal deficits). They also include measures that affect a country's liquidity and solvency (debt structure and forex reserves). Some of the operational factors that are considered in determining country risk include security, political stability, government effectiveness, legal & regulatory framework, macroeconomic conditions, financial & tax policy, labour market and infrastructure. EIU reviews the risk ratings of over 100 emerging markets on a monthly basis.
Rapid growth, highly skilled labour and opportunities in outsourcing boosted India 's ratings. While change in government brings no decline in risk for India , EIU says that Manmohan Singh-led coalition must support reforms to sustain current ranking.
" India is watched closely by overseas investors on whether reforms will continue in the Left supported government. There is little awareness about economic policies adopted by Left in West Bengal ," says Amit Mitra, secretary general, Ficci. He said FDI investment will gather momentum. " India is as safe as what it was and change in government has not changed the situation," says N Srinivasan , DG-designate, CII. "Indian industry is upbeat and full of self-belief."
Former RBI governor Bimal Jalan is confident that the country can handle any economic crisis. Compared to China , India has become marginally safer in 2004. This perception could be partly attributed to the strong external sector performance and reduced border-tension that India experienced a year back.
EIU says that India is poised to grow at 8.3% in 2003-04 (April-March) and will grow at 7.3% in 2004-05 — owing to a "smaller harvest and hence less robust growth in personal incomes". It also predicted a slowdown in China . " China 's GDP is likely to grow by 9.4% this year and by 8.1% in 2005, with the slowdown being led by an easing of investment growth," projects EIU. India has an edge over other global competitors in outsourcing opportunities, R&D. China has scored over every country in cheap labour.
Despite slowdown, China will continue to be among top emerging markets for FDI, but India is also becoming very attractive to global investors. EIU has projected FDI flows to India to touch $13 billion in 2008 from $5 billion in 2003. However, China is forecast to receive $58 billion in FDI this year. " India 's performance as one of the most attractive destinations for FDI is based on several criteria, considering Indian authorities' commitment to attract more FDI is yet to be fully matched by more investment-friendly policies," says EIU.
CII says effective communication is key to reduce India 's risk further, saying, "The biggest challenge is spreading the right message to the global investing community." Jalan pointed out the need to reduce fiscal deficit.