New Delhi: Soaring inflation and slowing growth in India will not affect foreign investment flows, as these phenomena are not unique to the economy and the country still holds more attractions than others, KPMG said on 20 June.
Inflation is soaring globally, driven by food and fuel costs, with double-digit inflation in India, Indonesia, Vietnam, Sri Lanka and Pakistan, and has moderated growth across economies.
Inflation in India came in at a 13-year high of 11.05% in early June, and growth is expected to slow to 8-8.5% in the year to March 2009 from 9% a year ago.
“It is not that the rest of the world is not having it, that India sticks out as a complete sore thumb and is a unique factor that someone says: should I do that or not,” KPMG India’s chief executive Russell Parera told Reuters in an interview.
“Fundamentally, if you look at India, you can pick more sectors. Penetration statistics, in comparison to many countries is low, growth rates are high, the market is expanding.”
A KPMG survey of 300 corporate strategists in 15 countries, released on 19 June, had indicated India would see the largest growth in its share of foreign investment in the next five years.
Eighteen percent of companies expect to make a significant investment in India by then, up from the 10% who expect to make such commitments in the next 12 months, KPMG said.
Respondents said India would be the biggest investment destination for manufacturing by 2013/14 and hold the second position after China for investments in industrial products, KPMG said in the report.
Parera did not expect the indications from the survey to change significantly in India over the short-term due to inflation and growth concerns, as an investor bought into a country over the long-term.
“Investment is over a period of time, and the trendline will only be positive.”