Indian Investment in Eastern Europe: Prospects, issues and the way forward

Abstract

With liberalisation, economic growth and stable macroeconomic conditions, companies from developing countries like India, have started investing abroad. Of late, Indian companies have diversified their investments and have shifted from markets within Asia to European markets. This paper examines Indian investment in Eastern Europe, barriers to investment and possibilities for enhancing it through appropriate policy measures. Eastern Europe is a new destination for Indian investment. The paper highlights that India and East European countries have complementarities. However, despite several initiatives, the present level of Indian investment in Eastern Europe is low and limited to a few countries and sectors. A majority of the Indian investments are directed towards Russia and most of these investments are made in the manufacturing and mining sector. Moreover, a large part of the investments is made by a few large Indian companies. Based on in-depth interviews, the study found that lack of market knowledge, poor governance structure, high level of corruption, non-transparent public procurement process and cumbersome customs procedures are some factors hindering Indian investments in the region. The study identifies various areas of investment and collaborations and suggests measures to remove the barriers to investment. While some of these can be addressed under the on-going India-EU Broadbased Trade and Investment Agreement, others require strengthening diplomatic ties, foster information sharing and domestic reforms in India and East European countries.