FDI inflows down by about 60% in Aug

Reflecting fragile recovery in world's major economies, foreign direct investment into India dipped for the third consecutive month, by about 60 percent to USD 1.33 billion in August.
The FDI inflows in August 2009 were USD 3.26 billion.

Contrary to smart recovery in the domestic economy and a rebound in exports, overseas investment show a slackening trend in the current fiscal, an official said.

For the April-August period of 2010-11, FDI inflows declined by 35 percent to USD 8.92 billion compared to USD 13.8 billion in the same period last year, the official said.

According to experts, weak global economic recovery is one of the reasons for declining FDI in India.

"The main reason for the decline in FDI is slump in the major western economies like the US and Europe...," international trade expert with India's prestigious Indian Institute of Foreign Trade (IIFT) Rakesh Mohan Joshi said.

Crisil chief economist DK Joshi said: "This is not a good news for Indian economy. This reflects that global economic recovery is still fragile and some impact of that would be reflected in our FDI."

Foreign investment in July 2010 was at USD 1.78 billion, a dip of 49 percent and in June international inflows were at USD 1.38, a dip of 46 per cent over the year ago period.

The sectors which attracted foreign investment, included services, telecommunication, construction activities and computer software and hardware, the official said.

The country received maximum investment from countries like Mauritius, the US, the UK, Singapore, the Netherlands and Japan.

The government has recently floated discussion papers for public comments to liberalise FDI in multi-brand retail and defence sector.

The foreign investment remained low-key despite a recent UNCTAD survey showing that India would remain the second most important FDI destination for transnational corporations during 2010-2012, next only to China.

In its latest 'World Investment Prospects Survey 2010-2012', the United Nations Conference on Trade and Development (UNCTAD) said transnational corporations remain buoyant about investment prospects in China, India and Brazil.

FDI for 2009-10 at USD 25.88 billion was lower by 5 percent from USD 27.33 billion in the previous fiscal.

Govt moots relaxation in FDI rules on JVs

The government on Friday proposed a major relaxation in FDI rules to allow foreign firms to bring in new technology and set up new independent business without clearance from their existing local partners.

The move is aimed at attracting foreign direct investment (FDI) into the country, which has recently slowed down.

Under the present dispensation, a foreign player who had set up a joint venture (JV) in India before January 12, 2005 but now wants to open a new business independent of the existing domestic partner faces barriers.

The foreign player not only needs the government approval but also a 'no-objection certificate' from the domestic partner to the effect that the new forays would not "jeopardise" interest of the existing JV.

"The proposal is a welcome move it will attract more and more FDI and will also bring in high quality products for Indian consumers at competitive price," Naresh Makhijani, Executive Director, KPMG said.

The FDI rules proposed to be relaxed were not applicable to the joint ventures entered after January 12, 2005. Thus, the changes would help foreign investors who entered JVs before this date.

Suggesting abolition of this rule, the Department of Industrial Policy and Promotion (DIPP) said in a discussion paper, "There is a need to examine whether such a conditionality continues to be relevant in the present day context."

Alternatively, it has suggested that the stipulation of no-objection from the domestic partner should not be applicable to JVs which are 10-year old.

It has invited comments from the stakeholders till October 15.

The move follows representations from foreign investors pointing out that their domestic partners were using a string of press notes since 1998 "as a means of extracting unreasonable prices/commercial advantage. These press notes had become a stumbling block for further FDI coming into the country."

The DIPP, the nodal agency for FDI related matters, said India has entered into a number of free trade agreements and several others are under negotiations.

"In such a scenario if an industry (FDI) is discouraged from being set up in India, it could be set up in a neighbouring country with whom a trade agreement exists or is being negotiated," it said.

India received USD 25.8 billion FDI in 2009-10.

After a pick up in the first two months of the current fiscal, the inflows have slowed down for June and July.

FDI dips 18% during Jan-June 2010

New Delhi: Foreign direct investment in India declined by 18.3 percent to USD 10.77 billion during the first half of 2010.

During January-June 2009, the country received USD 13.19 billion foreign direct investment (FDI), according to the data of the Industry Ministry.

"The main reason for the decline in FDI is slump in the major western economies like the US and Europe..., international trade expert with India's prestigious Indian Institute of Foreign Trade (IIFT) Rakesh Mohan Joshi said.

Joshi said that the flow of foreign investments depends particularly on the on the revival of the western countries.

The sectors which attracted maximum overseas investments include services, telecommunication, construction activities, housing and real estate, power and automobile.

The country received maximum investments from countries like Mauritius, the US, UK, Singapore, the Netherlands and Japan.

The government is making sustained efforts to make the FDI policy regime more attractive and investor friendly, with a view to attract investments from all major investing countries.

The government had floated discussion papers for public comments to liberalise FDI in multi-brand retail and defence sector.

FDI for 2009-10 at USD 25.88 billion was lower by five percent from USD 27.33 billion in the previous fiscal.