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India Poised to Become World’s Fastest Growing Major Economy in 2015

India Poised to Become World’s Fastest Growing Major Economy in 2015

The survey, conducted during March and April 2015, includes the views of more than 500 decision-makers from multinational organizations across sectors including industrials, automotive, consumer products, life sciences, infrastructure, technology, financial services and others. The report also presents a detailed overview of foreign direct investment (FDI) inflows and projects, covering sectors, emerging FDI destinations and countries of origin. It finds major gains in perception in comparison to the findings of the 2014 survey in key areas such as macroeconomic stability (up from 70% in 2014 to 76% in 2015), political and social stability (up from 59% in 2014 to 74% in 2015); relaxation in FDI policy (up from 60% in 2014 to 68% in 2015); and the government’s efforts to ease doing business (up from 57% in 2014 to 67% in 2015). Among India’s most attractive features for doing business, investors rated its vast domestic market and availability of labor as most appealing. “The survey findings are a testament to India’s growing appeal with the global investment community,” said Rajiv Memani, EY Chairman of the Global Emerging Markets Committee and India Regional Managing Partner. “Over the last year, the improvement in India’s macroeconomic indicators, accompanied with the ongoing efforts to revitalize growth have offered new hope to investors. It is an encouraging start and we need to build upon it further.” “We are determined to make India an extremely easy and simple place to do business,” said Amitabh Kant, Secretary, Department of Industrial Policy and Promotion, Ministry of Commerce and Industry, Government of India. “Our first priority is to do away with the many procedures and rules, followed by bringing in consistency and clarity in all our policies and tax regime and developing a world-class infrastructure.” EY-2015-india-attractiveness-survey-ready-set-grow-infographic Reforms drive FDI inflows Among specific reforms expected to drive growth, 89% of the investors said that investment in infrastructure projects and the 100 Smart Cities project would be significant, while both financial inclusion, including Digital India and proposed corporate tax reduction from 30% to 25%, were considered significant by 83% of the respondents. Implementation of Goods and Services Tax (GST) and legislation on land acquisition were also mentioned by investors as important for attracting FDI. “With the pro-reform government at the center, the state governments in India have also embarked on adopting policies and processes to attract investments,” said Gaurav Taneja, Partner and National Leader – Government & Public Sector – EY India. “These include reforms in labor laws, single window clearances, online compliance and land availability, which play a very significant role in investors’ choice of locations. Importantly, there is also a perceptible shift in attitude to one of welcoming investments.” Robust investor confidence is also reflected in FDI inflows, with the 2015 India attractiveness survey citing a sharp turnaround. The report highlights data from fDi Markets data, indicating that in the first six months of 2015, India has become the top FDI destination with US$30.8b of FDI inflows, moving up from the fifth position in the corresponding period last year. Earlier, during the calendar year 2014, India reversed a two-year decline with FDI inflows of US$25b, registering a 32% increase over the previous year. In the same period, the number of FDI projects rose 37% to reach 680, contrasting with a 3% decline worldwide. Manufacturing leads investment plans More than three out of five respondents said they had plans to invest in India over the next year and 62% are looking at manufacturing, both to serve the Indian and global markets from India. Most of these respondents prefer to expand existing operations, followed by expansion through acquisitions and, if necessary, by joint ventures and alliances. Compared to the 2014 survey, the number of respondents who believe that India will be among the world’s leading top three destinations for manufacturing by 2020 has increased from 24% to 35%, while those who believe India will evolve as a regional and global hub for operations is up from 9% to 21%. The increased interest in investing in manufacturing is also reflected in FDI inflows, which showed a 62% increase in calendar year 2014 compared to the previous year, ahead of the 31% growth in the services sector FDI. In the same period, the share of manufacturing in total FDI increased from 37% to 45%. The trend continues in the first six months of 2015 with manufacturing registering a 221% increase in FDI inflows. Among sectors, defense and aerospace, cleantech, automotive, metals and mining, consumer products and energy have shown a sharp increase in FDI, while infrastructure, life sciences and chemicals declined during the year. Financial services FDI inflows grew at 128% year-on-year, outperforming the overall 31% services sector growth. Make in India program resonates with investors Within six months of its launch in September 2014, the Indian Government’s Make in India program resonated with investors, with 55% of respondents saying that they are aware of the initiative. Those aware of Make in India are more upbeat about expansion plans, with 70% stating that they are likely to expand or relocate their manufacturing facilities to India in the next five years. “We are driving one- and three-year action plans across ministries so that we all work as a team to make India a manufacturing destination,” says Kant. “Aided by measures taken in this year’s budget, we will see India become a nation of young innovators. I believe that India will see a huge number of startups in both digital and manufacturing in the years ahead, and that India will become a nation of job creators rather than job seekers.” Investors warm up to second-tier cities for investment Bengaluru, Mumbai, Delhi-NCR, Chennai and Pune continue to be the top destinations for overall FDI. Among emerging cities, global business leaders ranked Ahmedabad, Jaipur, Vadodara, Coimbatore and Visakhapatnam respectively as the top five emerging cities for FDI. Investors are showing increased enthusiasm for India’s emerging cities with a 79% surge in FDI in 2014, and 21% in metropolises. EY is a global leader in assurance, tax, transaction and advisory services. EY’s attractiveness surveys are widely recognized as a key source of insight on foreign direct investment (FDI).]]>

Switzerland, Singapore, and U.S., rank as world's most competitive countries

Switzerland, Singapore, and U.S., rank as world's most competitive countries

  • The Global Competitiveness Report 2015-2016 finds countries need higher productivity to address sluggish global growth and persistent high unemployment
  • Failure to boost competitiveness is compromising resilience to recession and other shocks, report finds
  • Switzerland, Singapore and the US have been nurturing innovation and talent; this has kept them at the top of the Global Competitiveness Index, which profiles 140 economies
  • The World Economic Forum released its annual Global Competitiveness Report, which assesses the factors driving productivity and prosperity in 140 countries. First place in the GCI rankings, for the seventh consecutive year, goes to Switzerland. Its strong performance in all 12 pillars of the index explains its remarkable resilience throughout the crisis and subsequent shocks. Singapore remains in 2nd place and the United States 3rd. Germany improves by one place to 4th and the Netherlands returns to the 5th place it held three years ago. Japan (6th) and Hong Kong SAR (7th) follow, both stable. Finland falls to 8th place – its lowest position ever – followed by Sweden (9th). The United Kingdom rounds up the top 10 of the most competitive economies in the world. WEF_GCI_top10 This year’s edition found a correlation between highly competitive countries and those that have either withstood the global economic crisis or made a swift recovery from it. The failure, particularly by emerging markets, to improve competitiveness since the recession suggests future shocks to the global economy could have deep and protracted consequences. The report’s Global Competitiveness Index (GCI) also finds a close link between competitiveness and an economy’s ability to nurture, attract, leverage and support talent. The top-ranking countries all fare well in this regard. But in many countries, too few people have access to high-quality education and training, and labour markets are not flexible enough. In Europe, Spain, Italy, Portugal and France have made significant strides in bolstering competitiveness. Thanks to reform packages aimed at improving the functioning of markets, Spain (33rd) and Italy (43rd) climb two and six places respectively. Similar improvements in the product and labour market in France (22nd) and Portugal (38th) are outweighed by a weakening performance in other areas. Greece stays in 81st place this year, based on data collected prior to the bailout in June. Access to finance remains a common threat to all economies and is the region’s greatest impediment to unlocking investment. Among the larger emerging markets, the trend is for the most part one of decline or stagnation. However, there are bright spots: India ends five years of decline with a spectacular 16-place jump to 55th. South Africa re-enters the top 50, progressing seven places to 49th. Elsewhere, macroeconomic instability and loss of trust in public institutions drag down Turkey (51st), as well as Brazil (75th), which posts one of the largest falls. China, holding steady at 28, remains by far the most competitive of this group of economies. However, its lack of progress moving up the ranking shows the challenges it faces in transitioning its economy. Among emerging and developing Asian economies, the competitiveness trends are mostly positive, despite the many challenges and profound intra-regional disparities. While China and most of the South-East Asian countries performing well, the South Asian countries and Mongolia (104th) continue to lag behind. The five largest members of the Association of Southeast Asian Nations (ASEAN) – Malaysia (18th, up two), Thailand (32nd, down one), Indonesia (37th, down three), the Philippines (47th, up five) and Vietnam (56th, up 12) – all rank in the top half of the overall GCI rankings. The end of the commodity super cycle has strongly affected Latin America and the Caribbean, and is already having repercussions on growth in the region. Greater resilience against future economic shocks will require further reform and investment in infrastructure, skills and innovation. Chile (35th) continues to lead the regional rankings and is closely followed by Panama (50th) and Costa Rica (52nd). Two large economies in the region, Colombia and Mexico, improve to 61th and 57th, respectively. It’s a mixed picture in the Middle East and North Africa. Qatar (14th) leads the region, ahead of the United Arab Emirates (17th), although it remains more at risk than its neighbour to continued low energy prices, as its economy is less diversified. These strong performances contrast starkly with countries in North Africa, where the highest placed country is Morocco (72nd), and the Levant, which is led by Jordan (64th). With geopolitical conflict and terrorism threatening to take an even bigger toll, countries in the region must focus on reforming the business environment and strengthening the private sector. Sub-Saharan Africa continues to grow close to 5%, but competitiveness and productivity remain low. This is something countries in the region will have to work on, especially as they face volatile commodity prices, closer scrutiny from international investors and population growth. Mauritius remains the region’s most competitive economy (46th), closely followed by South Africa (49th) and Rwanda (58th). Côte d’Ivoire (91st) and Ethiopia (109th) excel as this year’s largest improvers in the region overall. WEF_12-pillars-of-competitiveness “The fourth industrial revolution is facilitating the rise of completely new industries and economic models and the rapid decline of others. To remain competitive in this new economic landscape will require greater emphasis than ever before on key drivers of productivity, such as talent and innovation,” said Klaus Schwab, Founder and Executive Chairman of the World Economic Forum. “The new normal of slow productivity growth poses a grave threat to the global economy and seriously impacts the world’s ability to tackle key challenges such as unemployment and income inequality. The best way to address this is for leaders to prioritize reform and investment in areas such as innovation and labour markets; this will free up entrepreneurial talent and allow human capital to flourish,” said Xavier Sala-i-Martin, Professor of Economics at Columbia University. ]]>

    Netanyahu's Right-Wing Government Positive for Israel's Credit Rating – Moody's

    Netanyahu's Right-Wing Government Positive for Israel's Credit Rating – Moody's

  • Israel’s election result is a positive for its credit rating because it signals “economic policy cohesion,” said Moody’s
  • “We expect the new administration will be more long-lived than the last,” Moody’s added
  • (Reuters) – Israel’s election result is a positive for its credit rating because it signals “economic policy cohesion”, Moody’s Investors Service said on Monday, but the agency took no action.

    “We expect the government’s fiscal rules to contain spending growth and keep credit metrics for Israel (A1 stable) on their well-established improving trend, a credit positive,” analyst Kristin Lindow wrote in a report.

    Moody's Moody’s had said in December that the collapse of Israel’s governing coalition was negative for its rating because it raised policy uncertainty. But after a surprise win for Prime Minister Benjamin Netanyahu’s Likud party, which took 30 of parliament’s 120 seats, Moody’s said the coalition would likely last longer than its “short-lived incongruent” predecessor. Israel’s president is meeting party heads and will then decide who will be asked to form the next government. The odds heavily favour Netanyahu, who would establish a coalition with mainly right-wing and religious parties with about 67 parliamentary seats. “Such a government would likely be inherently more stable than a coalition led by the centre-left Zionist Union, which would struggle to put together a majority,” Lindow said. Zionist Union won 24 seats in the election. Once formed, the government will need to pass a budget for 2015. Moody’s believes the deficit this year will likely be less than 2014’s of 2.9 percent of gross domestic product. It said there could be clashes between Netanyahu and the next finance minister – likely to be Moshe Kahlon, whose upstart Kulanu party won 10 seats – over how to bring down housing prices, which could include releasing more land for building.

    “Nonetheless, the economy’s recovery from last year’s Gaza conflict should lead to rapid consensus over the budget allocations,” the report said, adding: “We expect the new administration will be more long-lived than the last.” (Reporting by Steven Scheer; Editing by Ruth Pitchford)

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