Foreign Direct Investment projects in India increased by 25 percent in 2011, according to a report by Ernst & Young. FDI projects continue to increase even as the government fails to pass reforms necessary to revive India's economy. Why are foreign companies still choosing to invest in Indian companies? Some obvious reasons noted on beyondbrics: India has one of the world's fastest growing markets, making it attractive compared to both developed and emerging economies, along with a growing middle class that provides a large talent pool. The Indian market is also extremely cost competitive.
To further accelerate the increase in FDI projects, India needs to improve both its infrastructure and its governance. More specifically, the government needs to reform its FDI laws to lift restrictions on foreign investments. Beyond FDI reforms, other problems such as high import tariffs, which markedly increase the cost of luxury goods
sold in India, should be addressed. With any hope, the significant growth in FDI last year will serve as a needed impetus to address current barriers to foreign investment in India and realize further increases.