Too Low For Zero

INDIA'S ability to attract foreign direct investment (FDI) is pathetic. According to the Global Competitiveness Report 1997—a document produced by the World Economic Forum that ranks 53 countries on the basis of their success in attracting FDI—India is ranked as the 45th most competitive economy, higher only to Vietnam in Asia, vying for funds. With a competitive index of minus 0.92, the status of India is way below par: a score of zero means a country is simply not competitive at all; a negative figure, therefore, would probably imply that it is negatively competitive. If that is the case, then perhaps India should be thankful that it does receive any FDI. The report takes into consideration eight factors—open financial markets, government regulation, quality of business management, openness of economy to international trade, quality of infrastructure, labour flexibility, technological prowess, and quality of judicial and political institutions—for compiling the rankings.

The report also takes into account an Executive Opinion Survey, where subjective parameters like perceptions of size of the market, investment incentives, and the protection of intellectual property rights are studied. Under this survey, India's ranking, at 24, is significantly higher. But this could be misleading: India's large size alone could probably influence its upward trajectory. According to this survey, while companies experience some practical problems in doing business in India, the low levels of confidence and high levels of frustration with the Indian government obscure the efficacy of liberal policies and a strong feeling of security in the investment climate.

In yet another survey conducted earlier for the US-India Business Council by Roper Starch Worldwide, the overwhelming feeling was that the Indian government had presented an overly favourable picture of itself to foreign investors. Besides, the most common complaint is the cumbersome bureaucracy that executives encounter while dealing with India. The 'tangles' include too much paperwork and red tape. More than two-thirds of the executives of Fortune 1000 companies surveyed said that bureaucratic challenges of doing business in India are greater than in any other developing country.