India's ranking went up from seventh in the latter half of 1998, AT Kearney said in its latest FDI confidence index where United States was named the most attractive destination in terms of FDI.

"Lack of transparent and consistent FDI policy in India is creating the biggest hurdle for transforming the country's attractive features such as the size of market, cost of production into actual inflows," at Kearney principal Arindam Bhattacharya told PTI.

He said the survey, conducted by probing CEOs and CFOs and other top decision-makers for the world's 1000 largest firms twice a year about their foreign investment plans over the next three years, found that India failed to capitalise on her advantages because of red-tapism and inconsistentpolicies on FDI.

The survey also found that greenfield projects and acquisitions of existing ventures accounted for over 60 per cent of capital flows to countries like India, Brazil, China and Poland.

While United States topped the chart as the most attractive FDI destination, China, United kingdom, Brazil and Mexico took the places above India in that order. Stating that emerging markets will continue to be the world's largest and fastest growing consumer markets, at Kearney said these markets are forecasted to outperform the developed countries in growth of income and consumption.

"Emerging markets still represent an integral part of MNCs' international expansion strategies. Not only do emerging markets comprise 60 per cent of the top 25 preferred destination for FDI, eight of the ten countries most frequently cited as new investment destinations are emerging markets," it said.

According to the survey, emerging markets received 18 per cent of actual FDI flows from 1986 to 1991. Consequently, the 72per cent share of global FDI flows that developed countries represented in 1998 was the highest since 1991.

AT Kearney said since December 1998, CEO fears about the prospects for global contagion emanating from emerging markets have subsided. "CEOs recognise this change and are less concerned that instability in individual emerging markets will produce major spill over effects in other emerging or developed countries," it said. "India suffers from an inability to formulate a clear, consistent regulatory environment for FDI," at Kearney said pointing out that though the country ranked among the 10 most attractive investment destinations, she received a mere $ 3.1 billion on realized direct investments in 1998.

Corruption was ranked third most important obstacle according to MNCs investing abroad, which was encumbering business and inhibiting FDI, it said. AT Kearney said 34 per cent of senior executives surveyed cited lack of transparency in the regulatory environment as the main obstacle toinvestment.

GDP was not the only decisive factor driving companies to invest in emerging markets, AT Kearney said adding that firms looked at a wider set of factors ranging from the quality of the infrastructure, the proximity to other markets and income distribution.

In fact, these countries often offered very heterogeneous markets due to the disparity between income levels, it said. "MNCs expanding into emerging markets can target either the high-end niche of a few million people receptive to international brands, or the hundreds of millions of `new' consumers, who earn an emerging market middle income but have a rapidly growing consumption demand," the survey said.