Prime Minister Narendra Modi
India's Prime Minister Narendra Modi gestures while speaking at Madison Square Garden in New YorkReuters

Higher labour costs in China could shift investors' interest towards its neighbour India, where the government led by Narendra Modi is wooing foreign investors with attractive incentives, the Chinese official media said.

Modi, who is on his maiden European visit, is expected to highlight India's advantages over its rivals in Asia, as he seeks to boost foreign direct inflows, especially into the manufacturing sector.

"In fact, the soaring labour costs and stricter environment regulations in China have pushed enthusiastic investors to look away and eye India as a more desirable destination, particularly those from small and medium-sized businesses," the China state-run Global Times reported.

In addition, the Shanghai Institute for International Studies, a state-run think tank, said India's proficiency in the English language makes it a favourite of foreigners.

It noted that if India is able achieve its economic growth target between 8.1% and 8.5% for the fiscal year 2015-16 despite the global economic slowdown, it would brighten the country's image among foreigners.

Modi earlier launched his "Make in India" initiative, intended to boost the country's manufacturing sector and increase exports. During his visit to Europe, he will try to portray India as an attractive investment destination.

Nevertheless, India's slow progress in infrastructure development could be a roadblock for the country, according to the think-tank.

"Although there have been many meetings and visits between India and the EU, such as regular business summits over the past decade, their talks have hardly translated into actual outcomes and no considerable European investment has been made in India. One reason is India's slow moving on infrastructure improvement," it said.

"A dramatic improvement in India's relationship with Europe and remarkable progress in their economic cooperation is unlikely to happen just through one visit. There won't be big strides forward in India and changes have to take place slowly and gradually."