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India rated 'extreme risk' economy for investors

Source : IANS
Last Updated: Fri, Feb 25, 2011 10:13 hrs
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India - along with Russia, Indonesia, Nigeria and the Philippines - has been rated a 'high risk' growth economy for investors.

In a ranking of 175 countries by the Global Risks Atlas 2011 released this week, Afghanistan, Somalia and Sudan have been dubbed 'extreme risk' nations because of weak governance, internal conflicts and regional instability.

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The rating by risk and mapping firm Maplecroft is based on key strategic and operational dangers facing investors in these countries.

In its report, Maplecroft evaluated the impact of 32 global risks that are 'outside the control of an individual government or business that have the ability to affect multiple regions and industry sectors'.

According to it, macroeconomic risk, security risk, governance risk and illicit economies, resource security, climate change, pandemics and societal resilience, including human rights, are the seven key 'global risk' areas for investors.

Though India, Russia, Nigeria, Indonesia and the Philippines hold the most interest for investors, they pose the most challenges for business, according to the report.

These economies are 'among the countries driving most of the positive momentum behind the world economy, but all are rated high risk', it said.

The report rated the Philippines (at 8), Russia (10) and India (at 11) as 'extreme risk' nations for investors because of security factors, political violence and terrorism.

Though these 'growth economies are ripe for investment and development due to fast and sustained economic growth', they are vulnerable to 'global risks' and lack structural resilience to face these risks.

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'It is therefore imperative for companies operating in these countries to identify and monitor the inherent risks that go hand-in-hand with the opportunities that these countries offer,' the report said.

India has been rated as 'extreme risk' for security because of simultaneous threats of terrorist attacks from Islamists and Maoists, it said.

India's ranking also reflected its lack of societal resilience, it added.

'Despite robust growth, the country has a poor human rights record and large sections of the population lack access to basic social infrastructure such as education, healthcare and sanitation.

'This reduces the country's resilience to 'global risks' by creating a less productive workforce, a population susceptible to the spread of disease, and potential instability due to risk of social unrest.'

The report added that Russia falls in the same category because of security issues. 'It (Russia) continues to face terrorist threats from Islamist and separatist insurgents from the Northern Caucasus.'

(Gurmukh Singh can be contacted at gurmukh.s@ians.in)




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