News: India no-risk zone for foreign investors

(IBN 12/04/2006) New York - Global consultancy firm Price Waterhouse Coopers has formed an alliance with Eurasia Group, a leading risk advisory company, to offer a Political Risk Assessment Service.

In an era of growing globalisation, the new tool will help clients integrate political risk management into their business strategy. India will figure prominently in this analysis.

Director, Research, Eurasia Group, Preston Keat, says, "We're going to be focusing on the largest 200-300 PWC global clients. And our sense is that at least 90 per cent of them, will have some fairly significant operations in India. So, India will be front and centre in terms of our analysis in this relationship."

A study by Eurasia Group has ranked the top political risks in 2006 in this order -

• Iran
• China
• Avian Influenza
• Latin America
• Iraq
• Nigeria
• Terrorism

(Source: Eurasia Group)

With Indo-US relations on an upswing and tensions with Pakistan subsiding, India is no longer considered a major political risk for multinationals. Instead, companies are worried about regulatory risks and ironically, competition from other investors.

"Everybody is going to India. As a result, you find that the cost implication in India is not as attractive as it used to be. So, it's a risk that we have to address. So, at least when our clients are moving to India, they have to go in with their eyes open," said an official from Price Waterhouse Coopers.

"This could be an issue, the cost of training is very high and you don't want the turnover that comes with that. So, as a result you have to factor in the turnover rates," he added.

Even as political risk recedes in India, multinational firms are increasingly concerned about the prospect of intermediate term instability in China. India could benefit from their desire to diversify their exposure beyond China.