FDI inflows into India up 100%


The India story keeps getting bigger. Foreign direct inflows during the first half of the financial year have doubled to $4.38 billion, as against $2.2 billion during April-September 2005. The numbers released by the government on Monday comprise the equity flows only. Data on reinvested earnings, coming from profits earned by foreign players already operating in India, are yet to be compiled.

During September 2006, FDI inflows rose 225% to $916 million, compared with $228 million in September last year. The data show that this has exceeded what was achieved in any previous year. The buoyancy in FDI flows during the first six months is likely to continue in the second half and the year may end up with $9-10 billion.

Adding another $3 billion in reinvested earnings and the figure could go up to- $12-13 billion. The government was targeting $12 billion FDI inflows this fiscal.

The data also throw up some changes. For instances, Singapore has moved up from the seventh slot to the second in terms of major sources of FDI and in the process has overtaken the US and UK. Mauritius with $2.54 billion FDI inflows during April-September 2005 remained at the top of the list, followed by Singapore $481.7 million with the US ($406 million) in the third slot. UK was at number four but saw a 41.4% dip in inflows into India.

In terms of sectors that attracted FDI, during the first half of the current fiscal, services ($1.51 billion) was more popular with foreign investors than electrical equipment ($777.9billion), while telecom ($405.2 million) remained at the third slot. Transport ($258.7 million) and energy ($138.3 million) occupied the fourth and fifth places, respectively.

Since 1991, when the foreign investment norms were simplified, it is electrical equipment — which includes computer hardware and services – that has been the top draw followed by services, telecom, transport and energy.

While the southern part of the country saw a steep growth in inflows, Delhi and Mumbai occupied the top two slots. The growth rate for the northern region was lower — rising 25% to $936.5 million — compared with Maharasthra (190.6% to $867.5 million), Tamil Nadu and Pondicherry (227% to $437million), Andhra Pradesh (211% to $289 million) and Gujarat (207.7% to $256 million).

If the trend of other states growing faster than Delhi, UP and Haryana continued, it could point to the northern states losing out. Since 1991, north India has accounted for nearly a quarter of the inflows, followed by Maharastra, Dadra & Nagar Haveli and Daman & Diu, which cornered around 22% of the FDI flows.

There are already proposals at final stages from Global conglomerates to invest in Shipping, Realty, Information Technology (server banks) and Automobile sectors. Even reputed Management schools are also not lagging behind in setting up their shops in India. The trends are encouraging and India can expect more FDI in the days to come.