India third most improving market in business climate, says IU

New Delhi: India is the third most improving country when it comes to the business environment, marked by strides in foreign direct investment policy, foreign trade, exchange controls and the tax regime, The Economist Intelligence Unit said in its 2024 rankings.

The index is calculated over a period of time—the previous five years, as well as the next five.

The research and analysis division of the Economist Group said in its latest ranking of countries by their business climate that India, followed by Greece and Argentina, are among the places where it expects the most significant policy improvements, infrastructure investment or growth in market opportunities.

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EIU said improvements in these countries' business environment index may subsequently result in an uptick in per capita growth in real GDP, investment spending and FDI.

EIU’s ranking of countries by the business environment is a more comprehensive index than the World Bank’s now- discontinued ease of doing business rankings, which was focused on regulatory procedures, the EIU said.

Singapore leads

Singapore, Denmark and the US are leaders among the top ten economies with the best business environment over the next five years. These are advanced economies and long-standing strong performers in the EIU index and tend to be safe bets for investments but both headline and per capita GDP growth rates are likely to be fairly stable and slow, EIU said.

Singapore topped the list with a score of 8.56. However, countries which are further down the ranking—such as Greece, Argentina and India – are where EIU expects a strong improvement in the coming years.

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“India is the only single-country market that offers a potential scale comparable to that of China. India’s youthful demographic profile promises both strong demand and good labour availability. Alongside solid economic fundamentals, digital infrastructure and favourable demographics, more policy support is being introduced to attract manufacturing investment,” EIU said.

The report also said that India and South East Asian countries are benefitting from the diversification of global investors away from China.

Prime Minister Narendra Modi has pledged to make the country a developed nation over the next 25 years and the Central government is investing heavily in infrastructure.

Cutting red tape…

Cutting red tape, offering incentives to local manufacturing and investing in research and development are policy priorities for the government. However, job creation to meet the requirements of a large working age population remains a major challenge.

The Modi government’s next budget, to be presented on 1 February, the second in its third term in office, is expected to set the trajectory of further reforms.

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EIU’s index measures the attractiveness of the business environment in 82 countries and territories, examining 91 indicators spread across 11 different categories including political environment, macroeconomic environment, market opportunities, policy towards free enterprise and competition and policy towards foreign investment.

Each of the indicators is scored on a scale – from 1 implying very bad for business to 5 implying very good. Scores are awarded both for the preceding five years and for the next five years.