Foreign Direct Investment in India
According to global services location index by AT Kearney, India continues to be the best place to start a business, and has replaced USA to become the second-most favoured destination for foreign direct investment after China.
The FDI inflow from 2005-06 to 2006-07 has tripled from US$ 5.5 billion in 2005-06, to US$ 15.7 billion in 2006-07, representing a growth rate of 184 per cent. As per international practices the total inflow of FDI in India stands to US$ 19,531 million.
Infact FDI (Foreign Direct Investment) has overtaken FII investment by almost US$ 5.6 billion in 2006-07, as per RBI’s report on International Investment Position.
According UNCTAD’s World Investment Report, India was the fourth-largest recipient of FDI during 2005-06 and was instrumental in FDI inflows to South Asia surging by 126 per cent, amounting to US$ 22 billion in 2006. Between 2001-02 and 2006-07 cumulative FDI inflows amounted to US$ 60,242 million that is between this period, inflows increased by about two and a half times.
Mauritius, US , UK Netherlands Japan ), Singapore and Germany were the principal sources of FDI during August 1991 to June 2007. The major sectors attracting FDI during August 1991 to June 2007 have been services (US$ 9,443 million), electrical equipment (US$ 8,964 million), telecommunication (US$ 4,880 million), transportation (US$ 3,856 million), fuels (US$ 2,892 million), chemicals (US$ 2,465 million) and construction (US$ 1,912 million).
The number of Foreign technical collaboration has also been increasing along with the increase of FDI. In 2006-07 total FTC approval was 81 whereas in the first four months of the 2007-08 this number has already reached 40. From August 1991 to June 2007 total FTC approval has reached up to 7,886.
Countries that contributed most in wise technology transfer approvals are US, Germany, Japan and UK whereas major sectors attracting technology transfers are -electrical equipment, chemicals, industrial machinery and transportation .
Major FDI proposals in Next Few Years
According to global services location index by AT Kearney, India continues to be the best place to start a business, and has replaced USA to become the second-most favoured destination for foreign direct investment after China.
The FDI inflow from 2005-06 to 2006-07 has tripled from US$ 5.5 billion in 2005-06, to US$ 15.7 billion in 2006-07, representing a growth rate of 184 per cent. As per international practices the total inflow of FDI in India stands to US$ 19,531 million.
Infact FDI (Foreign Direct Investment) has overtaken FII investment by almost US$ 5.6 billion in 2006-07, as per RBI’s report on International Investment Position.
According UNCTAD’s World Investment Report, India was the fourth-largest recipient of FDI during 2005-06 and was instrumental in FDI inflows to South Asia surging by 126 per cent, amounting to US$ 22 billion in 2006. Between 2001-02 and 2006-07 cumulative FDI inflows amounted to US$ 60,242 million that is between this period, inflows increased by about two and a half times.
Mauritius, US , UK Netherlands Japan ), Singapore and Germany were the principal sources of FDI during August 1991 to June 2007. The major sectors attracting FDI during August 1991 to June 2007 have been services (US$ 9,443 million), electrical equipment (US$ 8,964 million), telecommunication (US$ 4,880 million), transportation (US$ 3,856 million), fuels (US$ 2,892 million), chemicals (US$ 2,465 million) and construction (US$ 1,912 million).
The number of Foreign technical collaboration has also been increasing along with the increase of FDI. In 2006-07 total FTC approval was 81 whereas in the first four months of the 2007-08 this number has already reached 40. From August 1991 to June 2007 total FTC approval has reached up to 7,886.
Countries that contributed most in wise technology transfer approvals are US, Germany, Japan and UK whereas major sectors attracting technology transfers are -electrical equipment, chemicals, industrial machinery and transportation .
Major FDI proposals in Next Few Years
Government Initiatives
In order to boost FDI in India government has taken series of steps. Nearly 98 per cent of the Indian economy is open to FDI through the automatic route. Some of the other steps are as follows:
The Centre initially approved foreign investment through Foreign Investment Promotion Board (FIPB). Now center has handed some of its power over to the general permission route under the RBI. The FDI ceiling limit for telecommunication sector has been raised from 49% to 74%.
Government has also set up an Investment Commission whose main aim is to garner investments in the infrastructure sector. Government is also planning to increase the limit for investment in the infrastructure sector.
Retail market for foreign investors has been partially opened. Government has now allowed 51 per cent FDI in single brand retail outlets. 100 per cent FDI is permitted in sectors like power trading, processing and warehousing of coffee and rubber.
In some of the sectors, FDI limit has been raised to 100 per cent under automatic route. The sectors include mining of diamonds and precious stones, development of new airports, cash and carry wholesale trading and export trading, laying of natural gas pipelines, petroleum infrastructure, captive mining of coal and lignite.
Foreign funds would be allowed to own up to 26 per cent stake in entities that would be set up by state-owned banks, mutual funds and financial institutions to manage pension funds.
The Government is also planning to set up joint-venture company with the private sector for setting up country-specific investment promotion centers in India and abroad. The countries which government is planning to target are: US, Japan, Taiwan, UK, Germany, Singapore, France, South Korea, Switzerland and Italy.
Future Outlook
According to a report by Economist Intelligence Unit, India is likely to receive FDI of US$ 20.4 billion every year during 2007-11. Due to increasing and constant inflow of FDI in India, government has fixed the target FDI of US$ 30 billion during 2007-08. Also, according to UNCTAD’s world investment report, India has emerged as the second most-attractive location after China, ahead of the US and Russia, for global FDI in 2007.
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