FDI Confidence Index: Notes for UPSC

FDI Confidence Index is an analysis of the effect of political, economic and regulatory changes on the inflow of Foreign Direct Investment (FDI) into a given country in the years to come, as well as the preferences of CEOs, CFOs, and other top executives of Global 1000 companies. It is an index published annually by AT Kearney, a global consultancy firm.

Topic of the Day brings to you the most important and current concepts and terms for your IAS exam preparation. In this edition, you can read about the concept of FDI Confidence Index, its meaning, importance, etc.

Details about the FDI Confidence Index

  • The report includes detailed commentary on the markets and the impact a variety of global trade issues have on their FDI attractiveness, as well as a ranking of the top 25 countries.
  • It is constructed using primary data from a proprietary survey administered to senior executives of the world’s leading corporations. The companies taking part in the survey have $ 500 million or more annual revenue.

FDI Confidence Index 2020

The Top 10 countries in FDI Confidence Index 2020 are highlighted in the table below-

Countries FDI Confidence Index 2020 Ranks
United States 1
Canada  2
Germany  3
Japan 4
France 5
United Kingdom 6
Australia  7
China 8
Italy  9
Switzerland 10

The United States has topped the FDI confidence index in 2020 with a score of 2.26. The United States has topped the index for the 8th time, in a row.

India’s Rank in FDI Confidence Index 2020 –

India has again dropped out of Kearney’s 2020 Foreign Direct Investment Confidence Index. The only three developing economies- China, the UAE, and Brazil have made it in the top 25 of FDI confidence Index 2020.

India was ranked 16th in the 2019 list, while it occupied the 11th spot the year prior. In 2017, India made the top ten and was ranked 8th.

FDI Confidence Index 2020

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FDI Confidence Index 2019

The Top 10 countries in FDI Confidence Index of 2019 are given in the table below:

Country  Rank  Change from 2018
United States 1 No change
Germany  2 ↑ 1
Canada 3 ↓ 1
United Kingdom 4 No change
France 5 ↑ 2
Japan 6 No change
China 7 ↓ 2
Italy  8 ↑ 2
Australia 9 ↓ 1
Singapore 10 ↑ 2

Where does India stand?

  • India is ranked 16th in the FDI Confidence Index 2019, compared to 11th in 2018.
  • It slipped down 4 positions from the 2018 ranking. It was ranked 9th in 2016 and 8th in 2017 and 11th in 2018.
  • The fall in the ranking could be attributed to certain policies such
    • The challenges faced in the implementation of the Goods and Services Tax.
    • Demonetisation activity that caused a disruption in the business activities and subsequently, the economic growth, deterring the investor sentiments in the short term.
  • However, despite the teething troubles in the implementation of GST and the demonetization decision, India has managed to keep up a high ranking due to the following reasons:
    • Certain notable reforms such as the elimination of the Foreign Investment Promotion Board (FIPB) and Liberalisation of FDI thresholds for the retail, aviation, and biomedical industries.
    • India’s “Make In India” initiative continues to boost investment in the manufacturing sector.
    • India is ranked highest by the American investors and the industry sector in terms of their intention to invest which is a result of India’s pursuit of closer ties with the US.

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FAQ about FDI Confidence Index

What is the position of India in FDI Confidence Index 2021?

India has failed to find a place in the Kearney’s 2021 Foreign Direct Investment (FDI) Confidence Index, an indicator of FDI flows, for the second year in a row. India ranked 16th position in the 2019 list, while it occupied 11th spot the year prior. In 2017, India was ranked eighth. Only three emerging markets are on 2021 Index – China, the United Arab Emirates and Brazil. The US retained its top position for investment attractiveness and was followed by Canada, Germany, the UK and Japan.

How frequently FDI Confidence Index is published?

It is an annual survey of global business executives that ranks the markets likely to attract the most investment in the next three years.

Candidates can prepare better for UPSC 2020 exams by visiting the UPSC Syllabus page. For more related links and articles, candidates can refer to the table below:

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