Reports from the Indian Commerce Ministry revealed a tripled increase in foreign direct investments (FDI) inflows into the country in the last fiscal year ended March. According to the Indian Commerce Minister, Kamal Nath, the increased FDI was as a result of huge investments that were undertaken in the country by major foreign investors. FDI in the financial year (FY) ended March 31st went up to around $16 billion, about Rs 70, 400 crore from $5.5 billion, about Rs 24, 200 crore in the preceding fiscal year.
However, the above figures were not inclusive of the estimated billions of dollars that were invested into the stock and bond markets by foreign investors. The increased FDI inflows into the country were as well a direct result of the country’s recent economic boom and the increasing liberalization of regulations that govern offshore investments in the country in recent years, said the Minister.
In the last FY, global conglomerates such s IBM, Nokia, General Motors and Suzuki amongst others, undertook major investments in the country. Currently, FDI inflows into the country account for 6.8% of the overall investments, a rise of 0.5% from three years ago, said the Minister. Even so, he noted that the uncertain global credit crisis and the financial meltdown affected FDI in the services sector, with a decline of 33.5% to about $4.49 billion in the financial year 2009/2010.
According to further FDI data from the Department of Industrial Policy and Promotion (DIPP), the services sector, inclusive of both financial and non-financial services, got the most foreign investment inflows out of all the sectors in the fiscal year 2008/2009, with about $6.61 billion worth of FDI being undertaken in the sector. Countries with the most FDI inflows into India included the Netherlands, Germany, Mauritius, US, Singapore and France.
There was a marked decline in FDI in computers and the hardware segment to $919 million, down from $1.67 billion in 2008/2009 financial year. About 21% of total FDI in the financial year 2009/2010 were undertaken in the services sector with the construction, housing and realty and telecommunications attracting $2.86 billion, $2.84 billion, and $2.55 billion worth of FDI consecutively.
The government said it had set target at about $50 billion FDI per annum by 2012 and about $75 billion per annum by the year 2014. The resultant capital inflows have seen the Rupee appreciate steadily. Foreign Direct Investment into India is a capital account transaction under the Foreign Exchange Management Act (FEMA). The Government and Reserve Bank of India regulate such transactions.
23 June 2010.