Despite slowdown, prospects for FDI inflows look promising

Written by Economy Bureau | New Delhi | Updated: Dec 30 2008, 05:58am hrs
The continuing global economic meltdown has reduced the countrys capability in attracting higher foreign direct investments (FDI) but the momentum gained by FDI inflows in the months prior to October has helped India get record inward investments.

While the FDI inflow from April to September rose 137% at $17.21 billion compared to a year ago, October saw a fall of 26% at $1.49 billion. The total inflow during April-October was still higher by 80% than the corresponding period of the previous year.

In September, the country attracted FDI of $2.56 billion, a 259% growth over $713 million in the same month in 2007. The increase in FDI is mainly due to further liberalisation in FDI norms in petroleum and natural gas, civil aviation, commodity exchanges, credit information companies, mining of mineral and ores bearing titanium, and industrial parks, said the department of industrial policy and promotion, under the commerce and industry ministry.

The sectors that got highest FDI inflows from April to August were services ($2.34 billion), construction including roads and highways ($1.64 billion), housing and real estate ($1.62 billion) and computer hardware and software ($1.36 billion).

During April-August, Mauritius invested the most at $5.27 billion, while $1.72 billion came in from Singapore, $1.15 billion from the US and $580 million from the Netherlands.

The economic conditions in the country worsened after September 15, when the fall of Lehman Brothers shattered the sentiments of investors and sent the stock market into a tailspin. Exports fell for the first time in three years in October, dipping by 12% year on year.

But the conditions are better than the western world, and this is what led to the United Nations Conference on Trade and Development say in World Investment Report 2008, that the prospects for FDI to South, East and South-East Asia remain promising, despite concerns about the impact of the financial crisis.

Another key industrial indicatorgrant of industrial licences and foreign technical collaborationsalso saw healthy numbers. The Project Approval Board for industrial licences under the DIPP granted 102 direct industrial licences, 94 foreign technical collaboration proposals, converted 12 industrial licences and approved 4 letters of intent.

During the year, the government approved the Delhi-Mumbai Industrial Corridor project, with an aim at doubling the employment potential, tripling the industrial output and quadrupling exports from the region in the first five years.

It is also trying to replicate the model of this corridor in southern states with Chennai-Bangaluru-Mumbai Industrial Corridor (CBMIC) project. The work of preparation of the concept paper for the CBMIC project has been assigned to IDFC Projects Ltd.

For modernising and strengthening the intellectual property office, the government also approved a Rs300-crore plan for implementation during the 11th Plan (2007-2012). As part of this scheme, 414 new posts have been created in intellectual property office.