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Jul 12, 2012, 08.23 AM IST | Source: Reuters

Firms see India 3rd most-favoured destination: UN report

Major global companies consider India their third most favoured destination after China and the United States, a UN report said on Thursday.

Firms see India 3rd most-favoured destination: UN report

Major global companies consider India their third most favoured destination after China and the United States, a UN report said on Thursday, and investment inflows could increase by more than 20% both this year and next.

Foreign direct investment (FDI) flows into India leapt 30% to nearly USD 32 billion in 2011, though held back by slow pace of reforms, it still remains a long way down the league table of FDI recipients.

China drew USD 124 billion last year, while Brazil attracted nearly USD 67 billion and Russia USD 53 billion..

Also read: FDI inflow to India likely to continue: Nagesh Kumar

Some 179 global companies - from the manufacturing, services and primary sectors - were surveyed between February and May, on their favoured investment destinations for 2012 to 2014.

Kumar said FDI growth seems to be keeping its momentum in 2012, referring to furniture maker IKEA and Coca Cola's recent announcements to pump nearly USD 5 billion combined into India over the long term.

Though India's economic growth slowed to 5.3% in the March quarter, its slowest in nine years, its trends still compared favorably, Kumar said.

"Compared to many other places, India is doing better in terms of growth," he said, adding global investors were looking at the long term prospects and wide market in Asia's third largest economy.

The report said worldwide FDI flows exceeded the pre-financial crisis average in 2011, reaching around USD 1.5 trillion, despite turmoil in the global economy, and is projected around USD 1.6 trillion this year.

Global companies are sitting on hefty cash reserves and waiting for the euro zone situation to stabilise before investing, he said.

Earlier this year India allowed full foreign ownership of single brand retailers, although late last year it backtracked on a plan to allow in foreign supermarkets.

Many investors are hoping it revives that plan soon, after Prime Minister Manmohan Singh recently took over the finance portfolio and talked about the need to address problems in the insurance and mutual fund industries, as well as taxation.

Kumar said corporate investors look at long term prospects and recent controversies over retroactive tax proposals broadly aimed at taxing companies like Vodafone , or proposed general anti-tax avoidance rules (GAAR) would not hurt India's prospects as an investment destination.

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