Despite numerous challenges, European companies are keen to invest in India and are looking forward to a fresh round of growth once the new government is formed in the country this month, according to a study.
Besides, the European Union is also confident of an early conclusion of the bilateral trade pact that has been in the works for a while.
"Tactical greenfield investments, landmark acquisitions and steadfast dedication through uncertain economic cycles have been the key ingredients of the success enjoyed by European companies in India," Europe India Chamber of Commerce (EICC) Secretary General Sunil Prasad said.
"The common consensus is that the next government would usher in a fresh round of growth," he said in a statement.
Despite the challenges facing the Indian economy, EU firms are optimistic about the next 5 years, said the study, encouraging them to adapt their products and services to the mass market and take a long term view of India.
"The global headquarters should not expect their India units to rake in the profits every quarter. Companies that invest in India need to have lot of patience and deep pockets to sustain cash flow uncertainties. They should focus on the potential and not the short-term challenges," EICC research head Adith Charlie said.
European companies spent $198 billion in India in the last 10 years, making them the largest investors.
In the same period, Japanese and US firms channelised $138 billion and $50.7 billion, respectively, into their India units.
"The sheer scale, diversity, and regulatory and tax complexity of India can be overwhelming for a foreign company. Companies have to be patient and committed to experience sustainable growth in the country over the longer term," Ambassador of EU Delegation to India Joao Cravinho said in the study's foreword.
"The European Union is committed to strengthen EU/India trade relations and we are confident that the conclusion of the EU/India Broad-based Bilateral Trade and Investment agreement is possible in the near future," he said.
Total India-EU bilateral trade was $94.43 billion during April-February, 2012-13. It was $109.86 billion for
the entire fiscal year 2011-12.
The study cites the three most important reasons for European firms to invest in India: domestic market growth potential, proximity to markets or customers and skilled workforce availability.
It further suggests that reforms need to be initiated in trade facilitation and export promotion, along with better co-ordination between the Centre and states ahead of crucial policy changes.
"India must sort out some contours of its Intellectual Property Rights regime. The legal system must be fast-tracked and the use of compulsory licensing (CL) for essential pharmaceutical drugs must be the exception and not the norm," the study said.
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