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India needs more reforms to attract FDI: McKinsey
By agencies
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Friday, 07 October 2005, 19:30 IST
WASHINGTON: Global consultants McKinsey has said that "solid foundation" has now been put in place in India to push the economic growth to 8-10 percent but felt more reforms were needed to attract foreign investment.
The economic reforms started in 1991 have made India one of the world's fastest-growing economies, McKinsey said in its quarterly report while emphasizing that in future the government must focus on stimulating domestic demands, a vital step for attracting foreign investment.
India must intensify its efforts on important areas of reforms to build a competitive economy that benefits businesses and consumers alike, it said.
The global consultant also said most foreign companies see India only as a source of low-cost skilled labor particularly in IT, not as a major market for products and service.
The crucial distinction helped to explain why China attracted upward of ten times more FDI than India.
Indians save too little to finance the economic growth needed to provide jobs for the country's expanding working-age population. "Our projections show that the economy must grow by 8-10 percent annually or risk markedly higher unemployment," it said adding foreign investment was important to fill this gap.