India Beats China To Become Most Attractive Investment Destination, Global Investor Sentiment At 2-Year-High: E&Y Report

India has emerged at the top of a list of the world's most attractive investment destinations by beating China, according to a new survey, in a sign of growing investor confidence in a country that is struggling to recover from its slowest growth rate in a decade.

According to Ernst & Young's ninth biannual Capital Confidence Barometer, released on Sunday, India is closely followed by Brazil at the second position on the list, and China is relegated to the third slot. Canada and the U.S., at numbers four and five, respectively, round out the top five countries on the list.

The report's findings, based on a survey of 1,600 senior executives from more than 70 countries, showed that 90 percent of respondents are confident about the stability of the world economy, pushing the economic confidence barometer to a two-year high. The survey also found that 65 percent of investors expect the global economy to “improve at an accelerating rate” and deal volumes to improve.

“The fundamentals are in place to foster M&A (mergers and acquisitions): confidence in the global economy is at its highest for two years; cash is in abundance, and credit is readily available,” Pip McCrostie, a senior executive at the Big Four firm's transaction advisory services, said in a statement.

Almost 70 percent of all respondents said they expect deal volumes to improve globally over the next 12 months while 35 percent of the executives surveyed plan to pursue acquisitions, compared to only 25 percent a year ago. In India, about 38 percent of the respondents believed the M&A business will improve in the next 12 months, the survey reported.

A sharp depreciation in the rupee's value against the dollar and recent policy reforms, including the opening up of various sectors to foreign investors, have helped India move up to the top spot as the most attractive investment destination, according to the report, which also noted that the country now offers better investment opportunities, as Indian companies, saddled with debt and credit crunch, are looking to exit non-core businesses.

"This has created a large opportunity for foreign players vying for a greater role in the Indian market," it added.

“The investor outlook for India remains positive, despite the challenges the country’s economy has faced in the recent past,” Amit Khandelwal, head of EY's transaction advisory services in India, said, according to Indo Asian News Service. “At the same time, the improved condition of the world economy has helped increase confidence among deal-makers, prompting them to take a bolder stance toward executing transactions.”

According to the survey, the U.S., France and Germany are the top three nations that are most likely to invest in India, and the nation’s automotive, technology, life sciences and consumer products segments are expected to see the highest level of deal-making.