Directory » Trade Information » Trade Articles » India's FDI Growth

Trade Information

India's FDI Growth

Boosted by the rapid pace of the economic progress, profitable investment regime, flexible procedural policies with the relaxations introduce in various sectoral, has in turns prove to be the horde for the international key players in finding the new investment opportunities in the India. Rising trend of the foreign direct investment is also signaling towards the pivotal role playing by the foreign direct investment in the growth of the economy. The facts are also standing high as in the year 2007-08, foreign direct investment in India has crossed the mark of US$25 billion, which was 56 per cent more than what it was in 2006-07, i.e, US$15.7 billion. In the first half of the current financial year, 2008, India's foreign direct investment was registered to be US $341 billion. It has been projected that during the time period of 2008-09, the FDI of the country could attract US$35 billion.

India as the Favorable Destination

The result of the global survey conducted by Ernst and Young has put the India on the fourth rank of the most favorable destination after China, Central Europe and Western Europe, on the basis of the prospects of the different business locations. India has been put ahead of the United States of America and Russia. India received total 30 percent votes but both America and Russia got 21 percent votes each.

The report of the National Council of Applied Economic Research (NCAER) has stated out"In the first nine months of 2007-08, the net capital flows rose to US$ 83 billion from US$ 30 billion the country received during the corresponding period of the previous year."Those funds which have come as the FDI or the external commercial borrowing has sufficient to raise the portfolio funds between the time period of financial year 2007 and financial year 2008, the reserves have seen the rising trend by US$150 billion. Such influx of the funds have found to be sufficient for financing the current account deficit during the aforesaid time period. The Japan Bank for International Cooperation reveals that the India has emerged out as the 'favorable business point' for the Japanese investors.

More flow of the foreign direct investment has been seen in the skill intensive and high value added service industries, especially those which are related to the financial services and information technology. Furthermore, India has come out as the international service industry with the more attraction of FDI, providing the more unassailable low cost opportunities, the prevalence of high technology and language skills and the high supportive government policies. Companies from across the world are now busy in evincing their interest into various sectors such as construction, energy, electrical equipments, telecommunication, automobiles etc.

  • Many automobile companies from Japan, France and America have come up with their manufacturing base in the India.
  • Presently, inflow of foreign direct investment in the real estate sector is estimated in between of US$5 billion and US$5.50 billion. It has been projected that the investment in the Indian real sector will touch the mark of US$20 billion in next 2 years i.e, by 2010. Some of the leading international players- IJM Corp (Malaysia), Lee Kim Tah Holding (Singapore), Salim Group (Indonesia), Emaar Properties (Dubai).
  • Many foreign players are also interested in making their entry into the Indian arena. Like Wal Mart, Marks & Spencers, Roseby etc. have the investment to around US$10.
  • The surging force in the mobile service is presumed to reach at US$24 billion, as the cumulative FDI, in the telecommunication sector by 2010.

Government Planning

From last 10 years, India's government has undergone the complete change in its outlook when it comes about the FDI. The government has taken up several measures for augmenting the injection of the FDI In the India. Some of the steps taken in this direction are-

  • It is hoping that the government would soon take concrete steps in removing the disinvestment clause, which is the compulsory clause applicable on the international companies on various key sectors like chemical, food processing etc.
  • The government may permit 49% foreign direct investment in sectors like apparels, gems & jewelery.
  • Restructure of the Foreign Investment Promotion Board.
  • Formation of the Indian Investment Commission for functioning as the 1 stop haven for the investor and bureaucracy.
  • Rising the FDI Limit in many sectors like media, petroleum, telecom, aviation, banking etc.