Scams have sullied India's global image
Monday, 30 May 2011, 09:31 Hrs | 38 Comments
While a majority of German companies do not consider reducing investment in India because of corruption or policy problems, over a third (37 percent) of the managers are reassessing the investment risk due to "governance deficit."
The Indo-German Chamber of Commerce (IGCC) which has conducted the survey said that a vast majority of 85 percent of all managers felt that recent scams have damaged India's global image.
"Future investment decisions may be scrutinised more carefully, should India fail to tackle these issues," IGCC Director General Bernhard Steinruecke said.
He said investors clearly expect the Indian government to curb corruption and revive reforms for ensuring robust long-term economic growth.
However, the survey sounded positive as well for the Indian economy.
Eight out of 10 managers in German firms expect the Indian economic growth to match or exceed that of China within a decade.
"Among these optimists, about half forecast the economic expansion rates in Asia's two giants (India and China) to converge within the next five years," it said.
Indian economy grew by 8.6 percent in 2010-11, while China was world's top performing economy posting 10.1 percent expansion in 2010.
Strong business performance is a key reason for the German companies to plan substantial new investment.
About 44 percent of the survey respondents indicated plans to increase their investment activity over the next three years.
"FDI inflows are bound to receive an additional boost from new German companies setting up factories and offices here," the IGCC Director General said.
The survey found that the German companies are also hiring aggressively in India.
More than 37 percent intend to grow staff by 20 percent or more this year, while 25 percent plan to increase head counts by 10-20 percent, it said.