Business investment is picking up especially in emerging market economies including India, notwithstanding a bleak economic outlook, says a survey by Grant Thornton.
According to the Grant Thornton International Business Report (IBR), 45 per cent of businesses in the BRIC countries (Brazil, Russia, India and China) plan to increase investment in research and development over the next year, compared to just 18 per cent in the G7.
Similarly, 47 per cent of BRIC businesses plan to increase investment in plant and machinery over the next 12 months, compared to 37 per cent in the G7.
“The results indicate an interesting trend, while businesses in developed economies are sitting on their cash, their emerging market counterparts are investing in their future,” Grant Thornton India LLP Partner Munesh Khanna said.
This focus is apparent in some of the fastest growing markets globally: Compared to three months ago, 15 per cent more businesses in China are now looking to increase investment in research and development.
If this investment trend continues, developed economies could find their competitiveness eroding as against emerging economies, Khanna believes.
Overall the proportion of businesses looking to increase investment in new buildings has risen from 15 per cent to 21 per cent over the past 18 months, and in plant & machinery from 35 per cent to 38 per cent.
Moreover, businesses are also investing more in their employees — 68 per cent plan to offer pay rises over the next 12 months, compared with 51 per cent in 2010.
“Global economic uncertainty is weighing on short-term business growth prospects. However, it is encouraging to see dynamic businesses willing to adopt bolder, long-term growth plans,” Khanna added.
This strategy is not about immediate returns in terms of revenues and profits, but rather investing in their long-term growth and competitiveness.
“Even in tough times, businesses need to be forward thinking, keep pace with their competitors and invest in the future of their companies,” Khanna said