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This is revealed in AT Kearney's 2007 Global Services Location Index. Country's financial stability in the current environment of financial turbulence and a possible unwinding of macro imbalances sends clear message to the prospective foreign investors about India's position as an expanding investment destination. "India's external sector has displayed considerable strength and resilience since the reforms in 1991- despite several domestic as well as global political events and supply shocks in food and fuel........we partner with the global economy fully on the trade and current account while there is progressive liberalisation of the capital account, consistent with the progress in reforms in the real, fiscal and financial sectors", observed Dr Y.V.Reddy, Governor of India's central banking authorities, Reserve Bank of India (RBI) at the World Leaders Forum in New York in April this year. "The strong macro economic fundamentals, growing size of the economy and improving investment climate has attracted global corporation to invest in India. A major outcome of the economic reforms process aimed at opening up the economy and embracing globalization has led to to tremendous increase in Foreign Direct Investment inflows into India", says country's powerful industry lobby CII.
CUMULATIVE FDI EQUITY INFLOWS
In Rs Crore Cumulative amount of FDI inflows (From April 2000 to March 2009) Amount of FDI inflows during 2008-9 (From April 2008 to January 2009) Cumulative amount of FDI Inflows (Up to April 2009) In US$ Million 89,819
3,93,020
105,673 4,04,728
Branding India as a "safe and stable" investment destination amid global financial turmoil, country's Commerce and Industry minister Kamal Nath expects despite the global financial meltdown, FDI inflows into India during the current fiscal year (2008-09) will close at $ 35 billion signifying over $ 11 billion invested in the previous financial year (India's fiscal year is April to March). In 2007-08, reinvested earnings of foreign firms in India stood at $ 5.5 billion. Global firms have routed most of the investment through tax havens like Mauritius and Singapore during 2007-08, while Japanese firms have poured more money into India. Lot of investment is expected to flow into petroleum, manufacturing and electronic hardware sectors, Nath said.
Year Wise FDI inflows into Infrastructure sector during April 2000 to December 2007
(In US$ million)
YEAR 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 (Up to December 2007) TOTAL SOURCE: Federal Ministry of Commerce and Industry, Government of India
AMOUNT 292.37 1902.26 347.33 388.37 456.00 914.04 2179.39 4095.80 10575.56
Policymakers estimate that to sustain high growth rate India will need massive investment in the five year period to March 2012, including $500 billion in infrastructure, to sustain high growth rates. In January, India raised FDI limits in petroleum refinery, aviation, commodity exchanges, credit information companies and mining of some precious metals to attract more capital and boost growth in those sectors. The Congress(I)-led UPA government has plan to raise FDI limits in insurance to 49 cent. in fact the Cabinet has okayed it, now it will go to Parliament. However, the retail trade is yet to be opened further. The government is in the process of fine tuning FDI rules in order to make India more attractive as FDI destination.
FDI Equity Inflows (2008-09)
MONTHS April 2008 May 2008 June 2008 July 2008 August 2008 September 2008 October 2008 November 2008 December 2008 January 2009 Year 2008-09 (Up to January 2009) In Rs crore 15005 16563 10244 9627 9995 11676 7284 5305 6626 13347 105673 In US$ Million 3749 3932 2392 2247 2328 2562 1497 1083 1362 2733 23885
58203
14466
(+) 81
(+) 65
In FDI equity investments Mauritius tops the list of first ten investing countries followed by US, UK, Singapore, Netherlands, Japan, Germany, France, Cyprus and Switzerland. Between April 2000 and July 2008 FDI inflows from Mauritius stood at $ 30.18 billion followed by $5.80 billion from Singapore; $ 5.47 billion from the US; $ 4.83 billion from the UK; $ 3.12 billion from the Netherlands; $ 2.26 billion from Japan; $1.83 billion from Germany; $ 1.41 billion from Cyprus; and $1.02 billion from France.
Mauritius
11441 (2570) 2210 (502) 1164 (266) 1218 (275) 340 (76) 925 (208) 1345 (303) 82 (18) 310 (70) 219 (49) 24613 (5546)
28759 (6363) 3861 (856) 8389 (1878) 2662 (578) 2905 (644) 382 (85) 540 (120) 528 (117) 266 (58) 1174 (260) 70630 (15726)
44483 (11096) 4377 (1089) 4690 (1176) 12319 (3073) 2780 (695) 3336 (815) 2075 (514) 583 (145) 3385 (834) 1039 (258) 98664 (24579)
USA
7%
UK
6%
Singapore
9%
Netherlands
4%
Japan
3%
Germany
3%
France
1%
Cyprus
3%
1%
SOURCE: DIPP, Federal Ministry of Commerce and Industry, Government of India Figures in bracket are in US$ million
The average FDI inflows per year during the 9th Plan was $ 3.2 billion and during the 10th Plan it increased manifold to stand at $ 16.33 billion the annual average being $ 6.16 billion. The top five sectors attracting FDI in fiscal 2007-08 included Services sector; Housing and Real Estate; Construction activities; Computer Software & hardware; and Telecommunications. The infrastructure sector that offers massive potential to attract FDI witnessed marked increase in FDI inflows during this five-year period. The extant policy for most of the infrastructure sectors permits FDI up to 100 percent on the automatic route. From $ 1902 million in fiscal 2001-02 the foreign investment in India's infrastructure sector increased to $ 2179 million in 2006-07. But fiscal 2007-08 witnessed significant increase in the FDI inflows in the infrastructure. In first nine months till December 2007 of fiscal 2007-08 stood at $ 4095 million. From 2000-01 to December 2007, total FDI in India's infrastructure sector stood at $ 10575 million. .
SECTOR
2005-06
2006-07
2007-08
% of total inflows*
2399 (543)
21047 (4664)
26589 (6615)
23045 (5061)
78742 (181189)
22%
6172 (1375)
11786 (2614)
5623 (1410)
6944 (1599)
39111 (8876)
11%
Telecommunications
2776 (624)
2155 (478)
5103 (1261)
10797 (2374)
27544 (6216)
8%
Construction
667 (151)
4424 (985)
6989 (1743)
6224 (1483)
19606 (4646)
6%
Automobile
630 (143)
1254 (276)
2697 (675)
1792 (441)
11648 (2678)
4%
171 (38)
2121 (467)
8749 (2179)
10632 (2408)
21794 (5119)
6%
Power
386 (87)
713 (157)
3875 (967)
4079 (924)
13709 (3130)
4%
Metallurgical
6540 (147)
7866 (173)
4686 (1177)
3608 (850)
10956 (2613)
3%
1731 (390)
930 (205)
920 (229)
2561 (579)
9442 (2244)
2%
64 (14)
401 (89)
5729 (1427)
1196 (263)
8509 (2043)
3%
Figures in bracket are in US$ million * In terms of Rs. SOURCE: DIPP, Federal Ministry of Commerce and Industry, Government of India
Of the total FDI amounting to $ 56450 million in first 11 months of fiscal 2007-08, direct investment stood at $ 25455 million. of this, equity investment accounts for the major share with $ 20636 million. Portfolio investments totaled $ 30995 million.
EQUITY
Reinvested earnings+
Other capital+
FISCAL YEAR (APRIL-MARCH) FIPB Route/ RBI's Automatic Route/ Acquisition Route Equity capital of unincorporated bodies#
1991(August)-2000 (March)
15483
15483
2008-09 (April-Dec)
23885
334
3004
203
27426
99332
4959
26952
3382
134625
A. Direct Investment (I+II+III) 1. Equity (a+b+c+d+e) a. Govt. (SIA/FIPB) b. RBI c. NRI d. Acquisition of shares. e. Equity capital of unincorporated bodies# Reinvested earnings+ Other capital ++ B. Portfolio Investment (a+b+c) a. GDRs/ADRs## b. FIIs** c. Offshore funds & others Total (A+B)
2144
2821
3557
2462
2155
4029
6130
5035
4322
6051
8961
22079
61
191
190
32
528
435
897
1350 279
1645 390
1833 438
1460 633
1904 369
2760 226
5091 506
2748
3312
1828
-61
3026
2760
2021
979
11377
9315
12492
7003
* : Relates to acquisition of shares of Indian companies by non-residents under Section 6 of FEMA, 1999. Data on such acquisitions have been included as part of FDI since January 1996. ** : Represents inflow of funds (net) by Foreign Institutional Investors (FIIs). # : Figures for equity capital of unincorporated bodies for 2006-07 and 2007-08 (April-December) are estimates. # # : Represents the amount raised by Indian Corporates through Global Depository Receipts (GDRs) and American Depository Receipts (ADRs). + : Data for 2006-07 and 2007-08 are estimated as average of previous two years. ++: Data pertain to inter company debt transactions of FDI entities. : Include swap of shares of US $ 3.1 billion. Notes : 1. Data on FDI have been revised since 2000-01 with expanded coverage to approach international best practices. 2. These data, therefore, are not comparable with FDI data for previous years. Also see Notes on Tables of Table No 42&43. 3. Monthly data on components of FDI as per expanded coverage are not available.
In recent times transational corporations from many developing and transition ecionomies have become very important investors in developed as well as less developeed countries either through M&A route or through greenfield investments. According to a reserve Bank of India report, TNCs from economies like China, Brazil, India, Russia and South Africa have emerged as global leaders in manufacturing and services sectors. The UNCTAD's World Investment Report 2007 revealed that global outward FDI amopunted to $ 1216 billion in 2006 registering significant growth in last 17 years from $ 230 billion in 1990.
followed by non-finacial services' $ 1677.71 million and $ 620.48 milliion. Of the total investmemnts 96 percent were of large investments (4 5 million and above). Sectorwise 43 percent were bin manufacturing folowed by nonfimnancfinancial services ( 10 percent) and ytrading ( 4 percent).
Month Sector April Trading Manufacturing Non Financial Services Others Financial Total Note SOURCE : Reserve Bank of India 54.22 149.10 66.79 52.47 322.60 May 28.25 549.00 234.20 396.90 1208.00 June 46.74 4122.00 61.20 883.30 5113.00 July 40.57 495.40 23.63 172.60 732.20 Aug. 219.52 364.91 67.20 651.63 Sept. 24.17 1339.11 420.61 77.67 1861.56 Oct. 114.98 256.93 139.50 4554.26 7.00 5072.67 Nov. 311.55 345.09 248.07 596.99 25.46 1527.16 Dec 157.78 118.78 879.84 1156.40
Total Approvals
Construction Development projects including housing, commercial premises, resorts, educational institutions, recreational facilities, city and regional level infrastructure, townships
100%
Automatic
business of the Company Petroleum & Natural Gas Subject to sectoral regulations issued by Ministry of Petroleum and Natural Gas; and in the case of actual trading and marketing of petroleum products, divestment of 26% equity in favour of India partner/public within 5 years.
(a) Other than Refining and including market study and formulation; investment/financing; setting up infrastructure for marketing in Petroleum & Natural Gas sector)
100%
Automatic
Telecommunication 74% (including FDI, FII, NRI, FCCBs, ADRs, GDRs, convertible preference shares, and proportionate foreign equity in Indian promoters/investing Company Automatic upto 49% FIPB beyond 49%
(a) Basic and cellular; Unified Access Services, National/International Long Distance, V-Sat, Public Mobile Radio Trunked Services (PMRTS), Global Mobile Personal Communications Services (GMPCS) and other value added telecom services
(c) ISP without gateway, infrastructure provider providing dark fibre, electronic mail and voice mail
100%
Subject to the condition that such companies shall divest 26% of their equity in favour of Indian public in 5 years, if these companies are listed in other parts of the world. Also subject to licensing and security requirements, where required.
100%
Automatic
Power including generation ( Except Atomic energy); regulations transmission, distribution and Power Trading Ports Roads & Highways Shipping 100% 100% 100% Automatic Automatic Automatic
Subject to provisions of the Electricity Act 2003 Subject to sectoral regulations Subject to sectoral regulations Subject to sectoral regulations
Services Sector Computer Software & hardware Telecommunications Construction Activities Automobile Housing & Real estate Power Chemicals (Other than Fertilizers) Ports Metallurgical industries Electrical Equipments Cement & Gypsum Products Petroleum & Natural Gas Trading Consultancy Services Hotel and Tourism Food Processing Industries Electronics Misc. Mechanical & Engineering industries Information & Broadcasting (Incl. Print media)
787420.81 391109.74 275441.38 213595.12 146799.41 217936.02 137089.37 87008.07 63290.50 109563.20 57379.63 70781.19 94417.17 62416.85 48647.43 52500.05 34362.49 33914.75 28310.13 52115.90
18118.40 8876.43 6215.55 5029.01 3310.23 5118.85 3129.66 1964.06 1551.88 2612.85 1324.92 1621.03 2244.17 1480.94 1112.92 1217.50 760.32 748.57 648.86 1194.20
22.39 11.12 7.83 6.07 4.17 6.20 3.90 2.47 1.80 3.11 1.63 2.01 2.68 1.77 1.38 1.49 0.98 0.96 0.80 1.48
Mining Textiles (Incl. Dyed, Printed) Sea Transport Hospital & Diagnostic Centres Fermentation Industries Machine Tools Air Transport ( Incl. air freight) Ceramics Rubber Goods Agriculture Services Industrial Machinery Paper & Pulp Diamond & Gold Ornaments Agricultural Machinery Earth Moving Machinery Commercial, Office & Household Equipments Glass Printing of Books (Incl. Litho printing industry) Soaps, Cosmetics and Toilet Preparations Medical & Surgical Appliances Education Fertilizers Photographic raw Film & Paper Railway related components Vegetable oils and Vanaspati
21204.94 26736.94 17653.81 27241.42 27743.46 10955.32 10552.19 17462.43 11392.76 7937.13 13748.27 18612.76 11014.62 6649.12 5749.34 5798.71 5683.60 6066.23 4984.88 8087.87 14374.11 4282.17 2580.20 3281.85 3769.18
522.86 611.03 402.59 644.73 658.04 247.88 240.71 409.92 247.60 188.39 316.97 429.06 248.15 148.37 134.22 132.74 126.51 135.80 114.54 177.42 309.09 96.59 63.90 75.11 83.69
0.60 0.76 0.50 0.77 0.79 0.31 0.30 0.50 0.32 0.23 0.39 0.53 0.31 0.19 0.16 0.16 0.16 0.17 0.14 0.23 0.41 0.12 0.07 0.09 0.11
Sugar Tea & Coffee (Processing & warehousing coffee & rubber) Leather, Leathergoods & Piackers Non-conventional energy Industrial instruments Scientific instruments Glue and Gelatine Boilers & steam generating plants Dye-Stuffs Retail Trading (Single brand) Coal Production Coir Timber products Prime Mover (Other than electrical generators Defence Industries Mathematical, Surveying & drawing instruments Misc. industries Sub Total Stock Swapped (from 2002 to 2008) Advance of Inflows (from 2000 to 2004) RBI's NRI Schemes Grand Total
1836.64 3774.81 1621.56 3640.58 1368.36 511.44 385.80 238.67 406.48 1074.67 614.10 50.17 139.59 178.30 6.87 50.35 180561.54 3517310.79 145466.35 89622.22 5330.60 3757729.96
41.58 84.28 36.74 86.84 29.47 11.64 8.44 5.40 9.52 25.18 15.42 1.12 3.10 3.72 0.15 1.27 4162.55 81010.63 3391.07 1962.82 121.33 86395.85
0.05 0.11 0.05 0.10 0.04 0.01 0.01 0.01 0.01 0.03 0.02 0.00 0.00 0.01 0.00 0.00 5.19 100.00 -
Sector wise FDI inflows data reclassified, as per segregations of data from April 2000 onwards