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“With sharp currency depreciation and opening up of FDI in various sectors, India has become an attractive destination for foreign investors,” the report said.
Brazil is second in the rankings and China is third on the list, while the United States figures fifth in the list.
The report highlights automotive, technology, life sciences and consumer products as the most lucrative sectors for FDI.
Other nations in the top ten include Canada (4), South Africa (6), Vietnam (7), Myanmar (8), Mexico (9) and Indonesia (10).
The report also said that Indian corporate entities have started looking at developed markets for making acquisitions.
“After two years, European countries (UK and Germany) have made a comeback on the potential investment destinations list for Indian companies,” it added.
India relaxed FDI norms in August in many sectors, including multi-brand retail and telecoms.
The Indian Cabinet will review FDI policy in the pharmaceutical and housing sector on Monday.
According to EY, due to the present macro-economic pressures and heavy debt pile, several Indian companies are looking to divest non-core businesses.
“This has created a large opportunity for foreign players vying for a greater role in the Indian market,” added the report.
The US, France and Japan have emerged as the “top three investors likely to invest in India”, says the report.
The findings are a part of EY’s latest Capital Confidence Barometer report, based on a survey of about 1,600 senior executives from large companies across 70 countries.
“Indian companies also reflect a concerted focus on job creation as well as optimising operations to deliver cost reduction,” the report said.
India’s Foreign Investment Promotion Board last week approved 20 foreign direct investment proposals worth 9.16 billion rupees.