Lately India has emerged as the latest and the most saught after destination for FDI, reasons for this are many .Being the 10th largest economy in the world and the 4th in terms of People's Propensity to Purchase(PPP)India has emerged as a potential player for FDI and NRI investment. India has a large reservoir of skilled laborer at internationally competitive cost and a large entrepreneurial base and a diversified manufacturing structure makes it easy to find partners for collaborations .The country has a vast scientific and technical manpower of over 20 million whose size exceeds the population of Taiwan .The number of literates in India is more than the combined population of France and Japan.

India has a vast domestic market of 300 million strong middle class population having a substantial purchasing power and another 700 million people whose capacity to purchase is gradually increasing .Being a vibrant democracy with a large democratic setup together with a broad based legal framework including arbitration and a independent judicial system coupled with a vast network of bank branches , financial institutions and well organized capital and money markets makes India a favorable destination for FDI and NRI investments . The country also has a huge network of technical and management institutions of highest international standards for development of excellent human resources .India has a record of meeting its international financial obligations as per schedule and has never been a defaulter .The country has a strong English language base for business purposes .The strong and vibrant small scale sector is again good for establishing strategic alliances with the foreign counterparts. Strategic location of the country for the third world markets particularly for the rapidly growing South and South East Asian countries together with a supportive infra structure base helps in generating a healthy environment for FDI inflow into the country.

A recent World Bank Report has predicted that the Indian economy will become one of the worlds largest by 2050 A.D. What became as a drizzle in the 1980s the boom time of the Indian economy is now pouring in torrents like the Indian monsoonal rains .With a GDP growth rate of 8 percent since 2003 starting with a rebound in the Indian agriculture initially but now followed with a boom in manufacturing and service industries similar to that of China

In the last couple of months there has been a series of announcements of big investments by big foreign and NRI companies .Bill Gates in his recent visit to India has announced that the Microsoft will invest around $ 1.7 billion over the next four years in India . Intel the largest computer chips company of the world has decided to invest over $ 1 billion in India. CISCO has announced plans to spend $ 1.1 billion over the next 3- 4 years in India. For Microsoft India is emerging as a big market to exploit as Microsoft doesnt have much in stake in China. Buying of shares to the tune of $ 1.5 Billion in Bharti Tele ventures by Vodaphone is another big FII inflow into the country. To be a genuine competitor of China in FDI, India should aim to an annual growth rate of 10 percent which the Indian Prime Minister Dr Manmohan Singh has also rightly pointed out recently. So far India has not attracted more then $7.5-$8.0 Billion annually when compared to FDI inflows of $ 55- 60 Billion for China. The number of foreign and NRI debentures and share equities which have invested in India between August 1991 November 2002 is 15761 with a total foreign investment of Rupees 283447 Crores. Last year(2004-2005)India pulled in $7.5 billion of foreign direct investment (FDI). This year(2005-2006) it is expected to reach $10 billion as predicted by some India market analysts. The latest data of Standard & Poors study (released in March 2005) predicts that India had one of the fastest FDI growth rates among individual countries an annual average of 28 per cent between 1999 and 2005.

The negative side of this bouncing FDI and NRI inflow is the constraints of Indian economic growth which are not external but internal .Ups and downs in Indian agriculture plays a major role in constraining Indian growth rate coupled with unhealthy infrastructure like pot holed roads, incomplete flyovers, undeveloped airport facilities etc are the main bottlenecks in the growth of the Indian economy.

Again lopsided regional variation in the economic growth of the country is another major impediment in the growth of Indian economy. Truant Left Parties whose support is crucial for the survival of the UPA government at the center is another major hindrance in the inflow to FDI investment in India.

However a very reassuring development has been the tremendous boost up which the recent budget has given to industrial infrastructure and FDI investment in India .Positive side of the story is the tremendous resilience of the Indian economy, rapid growth of Indian agriculture, boost up to infrastructure, the tremendous global outsourcing boom in India and a well regulated and deep capital market.

If a comparative analysis of the Indian and Chinese economy is done some interesting comparison emerges through India lags behind China in many areas a lot needs to be done if India has to catch up with China .Indias total population is 1033 billion, Chinas is 1272 billion . Indias labor force is 451 billion; Chinas labor force is 757 billion. Indias annual GDP is 478 US $ billion, Chinas is US $ 1159 billion. 27 percent is the share of Indian agriculture in its GDP in China it is only 15 percent .27 percent is the share of industry in Indian GDP in China it is 52 percent. 48 percent of GDP in India comes from services in China it is only 33 percent .Rail routes in India is 62.5 thousand sq kms in China it is only 56.7 thousand sq kms .Motor vehicles per 1000 people in India is 7 in China it is 8. R& D expenditure in India is 0.6 % of GNP in China it is 0.1 %. Internet host in India is 0.8 per 10000 people in China it is 0.6 per 10000. Education expenditure in India is 3.2 percent of GNP and in China it is 2.3 percent. Undernourished people in India is 23 percent of the total population in China it is only 9 percent.

Thus if we look into the overall scene of Indian economy with a booming stock almost touching the 10000 mark, a buoyant Rupee of Rs 46.03 /Dollar and a healthy growth trend of the major sectors of the Indian economy the environment is very positive for FDI and NRI inflows . However compared to China it is still behind even though it is marching ahead .A lot more needs to be done. The Indian bull is no doubt energetic now however it has to run fast to overtake the Chinese dragon which is not impossible if friendly ground is created.

Dr Suvrokamal Dutta

Contact: sk_dutta70@yahoo.com

(The writer is a renowned foreign relation and economic expert)