Policy push seems only way to meet $35-bn FDI target

The government is short of $15 billion to achieve this fiscal?s target of $35 billion in foreign direct investment

The government is short of $15 billion to achieve this fiscal?s target of $35 billion in foreign direct investment (FDI).

Given a dismal performance in the past two months ? September and October, the latest months for which the FDI data is available ? the government has its fingers crossed more so as global economic sentiment remains cloaked in uncertainness.

The figure for October was $1.16 billion, which is 50% lower than the inflow seen in the same month last year. Similarly, the amount for September was down by 16.5% at $1.76 billion. With data of five more months to trickle in before the financial year ends, finance and commerce ministries, to meet the target of $35 billion, have their task cut out vis-a-vis the fiasco over FDI in retail and many more investment relaxations which are to receive Cabinet nod like those in sectors like aviation, I&B, single-brand retail, etc.

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India could have managed much more than $20.8 billion in foreign direct investment in the April-October period but for hitches in the RIL-BP and Posco deals.Talking to FE, a senior government official said: ?The target of $35 billion seems to be tough as global economic conditions don’t look good. Investor sentiment is not upbeat either. The country needs to send positive signals towards which the government is working.?

?With inflows on the decline, the government is contemplating a policy push,? the official said, adding that the main reason for this decline in themonthly figures is the poor state of global economic affairs, specifically the euro zone crisis and weak numbers from the US. The official, however, said the government is making efforts to overcome and reverse the scenario.

Finance minister Pranab Mukherjee on Friday said the government has not put retail FDI on the back burner. Also, on the same day, the Reserve Bank of India announced a further relaxation in FDI norms by exempting the transfer of shares between Indians and non-residents from various permissions in several key areas like financial services.

The foreign investment saw a decline of 25% last fiscal, when inflows stood at a mere $19.4 billion against $25.6 billion in 2009-10. Even the 2009-10 numbers were poor compared to the $27.3-billion figure achieved in 2008-09.

However, on the positive side, the cumulative FDI figures have shown a growth of over 50% during the April-October period at $20.8 billion as compared to $13.84 billion in the year-ago period.

Experts say only further relaxations in the FDI policy can help clock the target.

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First published on: 26-12-2011 at 04:39 IST