India better FDI destination for manufacturing, than services

New Delhi, June 26 (PTI) Services being India Inc's trump
card at global stage notwithstanding, the country has emerged
as the world's fourth most attractive emerging market for
manufacturing business foreign investment, for services it
has just managed to enter a top-20 list released today by PwC.
In PriceWaterhouseCoopers' latest emerging markets
rankings EM20, based on the countries' F.D.I. attractiveness,
India has been ranked fourth, ahead of its three B.R.I.C.
peers China, Russia and Brazil, for the manufacturing
business.
However, for the services business, India has been ranked
last at the 20th position in the list, while other B.R.I.C.
countries are ranked higher.
In the manufacturing sector index, Egypt, Bulgaria and
Serbia have grabbed top three positions, while Brazil, China
and Russia are ranked 12th, 14th and 18th, respectively.
The services sector list, which has been topped by Poland
and Chile at first two positions, has Russia at third, Brazil
at eighth and China at 16th ranks.
The EM20 index ranks the companies on the basis of PwC's
country risk and reward model. PwC said that the B.R.I.C.
countries continue to offer interesting opportunities for
investment with all the four appearing both in Manufacturing
and Services Indices.
Commenting on the report, PwC's India Chairman Ramesh
Rajan said, "India has seen a rising course in its ranking in
the manufacturing index since 2004, and will continue to do so
with its recent openness to trade and investment and
improvement in its transport, energy infrastructure as well as
in its average education levels."
PwC said that India "has traced a gently rising course in
the Manufacturing Index since 2004, when it was ranked ninth."
"Though growing strongly, India's per capita G.D.P.
remains relatively low due to the country's fast-growing
population a factor which ensures low-cost labour is widely
available. This also suggests that India is likely to maintain
a high position in Manufacturing Index for some years," it
noted.
PwC said that by 2038 India's GDP per capita is still
expected to be less than 10 percent of the average GDP per
capita of the developed world, whereas Chinas will be almost
25 percent of that level.
"But a continued high ranking in the Manufacturing Index
depends on India maintaining recent openness to trade and
investment and improving its transport and energy
infrastructure, as well as its average education levels."
PwC said that countries in the south east region of
Europe are the rising stars for foreign direct investment,
featuring in the Manufacturing and Services Indices.
While there are downsides to these markets in terms of
infrastructure and governance issues, South East Europe is a
region with considerable potential, it noted.
"For manufacturing companies seeking to invest in
emerging markets, low production costs are a key requirement.
Other facts then come into play, including the locations
country risk premium, its distance from key export markets and
the local corporation tax rate.
The global consultancy and advisory major said that the
Services Index is largely influenced by high per capita G.D.P.
which usually comes after long-term market stability. For
businesses in the services sector, relatively high GDP per
capita levels are a significant factor.
Typical service businesses represented in the model would
be banks, insurers, media, telecoms and I.T.-related
operators.
The index provides a risk-adjusted measure of the
relative value created per dollar invested in businesses in
key emerging markets, it noted.