The high-growth momentum of the Indian economy is pushing foreign direct investment (FDI) inflows to new peaks.
Commerce & industry minister Kamal Nath is confident that India will attract FDI worth more than $12bn in ’06-07 as compared to $7.7bn the previous year.Current trends indicate a big rush in FDI, with inflows during the first two quarters of the current financial year increasing by 100%.
“While $9bn will be fresh investments, $3bn is expected from retained earnings,” Mr Nath said on Monday. The $12-bn inflow will make it the highest since the Indian economy was opened to FDI.
FDI inflows have recorded a 100% jump in the first two quarters with cumulative inflows amounting to $4.4bn as against $2.2bn in the same period last year, he said while addressing the media here. FDI has shown a growth of a whopping 225% in September ’06 with an inflow of $916m as against $282m during September ’05.
Mr Nath said DSP Merrill Lynch has emerged as the top investor during the period, accounting for inflows of $483m in the past six months. Barclays Bank, in collaboration with AAA Global Ventures, has emerged as the second major contributor with investments to the tune of $368m.
As for earlier, the largest amount of investments had come from Mauritius at $2,545m in the first six months followed by Singapore at $481.7m.
Growth in FDI from the United Arab Emirates (UAE) was 490.74%, followed by France at 380.96%. “Singapore investments have shown a very high growth of 305% due to our economic co-operation agreement with the country,” Mr Nath said.
As far as the most attractive investment sectors are concerned, services has taken the lead with inflows of more than $1.5bn. Electrical equipment and telecommunications have continued to remain favourites, attracting FDI worth $777.9m and $405.2m, respectively, in the first two quarters of the current fiscal.
As per the estimates of the department of industrial policy and promotion, the national capital of Delhi has emerged as the top favourite amongst all Indian cities with foreign investors investing $936.5m. Delhi is closely followed by Mumbai, which has got foreign investments worth $867m in the six-month period. Chennai, Hyderabad and Ahmedabad follow with $437m, $288.9m and $256m respectively.
Mr Nath pointed out that the Indian manufacturing industry has shown a growth rate of over 12% in the first two quarters for the first time. “Between April-September ’06, manufacturing recorded a growth of 12.1% as compared to 9.5% in the same period the year before,” he added.
The growth of manufacturing has been led by high growth of over 19% in areas like basic metal and alloys, beverages, wood and wood products. Machinery and transport has shown a growth of 11.6% and transport equipment has recorded a growth of 11.9%.