Home India FDI Inflow Dips 25% In 11 Months Of 2010-2011 INVESTMENT BANKING

April 25, 2011, 02:14 PM IST

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India FDI Inflow Dips 25% In 11 Months Of 2010-2011

India needs to worry on the foreign direct investment (FDI) front. According to the statistics released by Indias Ministry of Commerce and Industry, the country has received only $18.35 billion in FDI in the first 11 months (April-February) of the financial year 2010-2011, compared to $24.63 billion that came in the 11 months of the previous financial year. Although it is a significant dip, the government has not mentioned the reasons for the fall except for saying that the trend will be reversed as it has received a few proposals for FDI". Anand Sharma, Minister for Commerce & Industry, said that fresh investments, particularly in services sector computer (software and hardware), telecom, construction and real estate have been received, according to a report. Some of the deals that the government is betting on include British Petroleums proposal to buy 30 per cent stake in 23 out of 29 exploration blocks, held by Reliance Industries, which would be worth $7.2 billion, according to the deal announced in February, and Vodafones deal to acquire the 33 per cent stake held by Essar in Vodafones India operations announced in March. The FDI inflow in the full financial year (April-March) of 2009-2010 was $25 billion. Going by the current data, it is unlikely that India has recorded large numbers in March 2011, to beat last years FDI inflow. The services sector (financial and non-financial) attracted maximum FDI during the period, accounting for $3.2 billion or about 17.7 per cent of the FDI. The telecom industry came in second with $1.4 billion or 7.6 per cent, followed by automobile ($1.32 billion or 7.1 per cent), power ($1.23 billion or 6.7 per cent), housing and real estate ($1.1 billion or 6 per cent).

In other highlights of the statistics, Mauritius continues to be the preferred route for directing FDI into India. About 36 per cent of FDI came via Mauritius in the first 11 months of the last financial year mainly because most of the investors want to take advantage of the double taxation avoidance agreement between Mauritius and India and Mauritius-based investors do not have to pay capital gains tax in India. Singapore is the second largest contributor of FDI after Mauritius, accounting for nearly 9 per cent of the investment during the same period. Japan comes in third with 8.3 per cent, followed by the Netherlands and the USA with 6.1 per cent each, and Cyprus with 4.5 per cent. The UK is a distant eighth in FDI ranking, contributing only 2.8 per cent of the inflow into India during April-February 2010-11. Among the Reserve Bank of India regional offices that monitor the FDI inflow into the country, Mumbai has received the largest amount of FDI worth about $5.7 billion in the 11 months of 2010-2011, followed by New Delhi with $2.4 billion. This constitutes about 31 per cent and 13.4 per cent respectively. Chennai came third with 7.2 per cent or $1.32 billion, closely followed by Bangalore with 7.1 per cent or $1.3 billion and Hyderabad (6.5 per cent or $.2 billion). Ahmedabad, which has been traditionally receiving higher FDI, got only $692 million in the 11 months of 2010-2011.

Amount of FDI Inflows (In Rs crore) (In US$ million) 48,312.89 10,610.77 APRIL 2011 MARCH 2011 FEBRUARY 2011 JANUARY 2011 DECEMBER 2010 NOVEMBER 2010 OCTOBER 2010 SEPTEMBER 2010 AUGUST 2010 JULY 2010 JUNE 2010 MAY 2010 APRIL 2010 MARCH 2010 FEBRUARY 2010 JANUARY 2010 DECEMBER 2009 NOVEMBER 2009 OCTOBER 2009 SEPTEMBER 2009 AUGUST 2009 JULY 2009 JUNE 2009 MAY 2009 APRIL 2009 MARCH 2009 FEBRUARY 2009 JANUARY 2009 DECEMBER 2008 NOVEMBER 2008 OCTOBER 2008 SEPTEMBER 2008 AUGUST 2008 JULY 2008 JUNE 2008 MAY 2008 APRIL 2008 MARCH 2008 48,220.49 47,107.99 46,746.29 46,727.06 45,667.64 45,529.61 45,508.80 45,494.95 45,397.66 44,887.39 44,729.08 42,619.88 40,705.73 404,390.74 402,818.67 398,094.60 391,786.76 386,448.00 381,822.18 368,899.62 332,641.40 317,198.97 314,219.13 312,598.48 284,743.23 279,020.94 275,441.38 274,725.04 256,716.88 256,716.88 255,009.48 182,042.72 180,426.68 176,865.61 176,865.61 167,474.50 167,474.50 10,589.27 10,341.81 10,262.19 10,257.97 10,023.36 9,992.70 9,988.01 9,985.00 9,964.11 9,855.17 9,821.17 9,360.76 8,930.61 8,872.00 8,838.07 8,735.28 8,600.00 8,485.36 8,386.35 8,119.57 7,369.42 7,050.88 6,988.50 6,956.34 6,399.92 6,288.22 6,215.55 6,200.76 5,831.08 5,831.08 5,795.99 4,194.56 4,156.92 4,073.78 4,073.78 3,841.53 3,841.53

FEBRUARY 2008 JANUARY 2008 DECEMBER 2007 NOVEMBER 2007 OCTOBER 2007 SEPTEMBER 2007 AUGUST 2007 JULY 2007 JUNE 2007 MAY 2007 APRIL 2007 MARCH 2007 FEBRUARY 2007 JANUARY 2007 DECEMBER 2006 NOVEMBER 2006 OCTOBER 2006 SEPTEMBER 2006 AUGUST 2006 JULY 2006 JUNE 2006 MAY 2006 APRIL 2006 MARCH 2006 FEBRUARY 2006 JANUARY 2006

164,910.23 160,408.94 158,770.23 156,074.44 155,455.13 152,122.74 152,037.54 207,178.05 203,429.18 202,269.60 167,322.02 166,908.44 166,750.33 166,120.09 165,535.08 164,094.87 162,690.34 161,716.24 158,524.96 157,802.64 157,206.60 156,808.45 143,368.31 122,180.23

3,777.99 3,664.70 3,623.08 3,554.73 3,539.02 3,454.68 3,452.57 4,880.15 4,787.39 4,758.95 3,902.00 3,892.19 3,888.59 3,874.32 3,861.13 3,828.86 3,797.54 3,776.12 3,707.62 3,691.57 3,679.80 3,670.95 3,372.28 2,894.19

Foreign Direct Investments in Indian Telecom - September 29th, 2010 FDI plays an important role in telecom sector as well as an economy as a whole. Earlier, there were very few public players like BSNL, MTNL and VSNL in this sector but as the time progressed and competition increased, the private players like Airtel, Reliance, Tata, Vodafone and Idea came into play which changed whole scenario of telecom sector. FDIs are important because they not only bring capital and technology into the market but they provide employment opportunities and effective productivity also. The liberalization measures post-1990 have changed with foreign investments radically, now portfolio as well as Foreign Direct Investment are not only allowed but also actively encouraged. During the decade of the nineties, the 'ceilings' on FDI in different sectors were progressively raised. In 2001, 100 per cent foreign investments were allowed in several industrial sectors. Also, 100 per cent Foreign Direct Investment is allowed in almost all the infrastructure sectors. FDI policy provides the investor friendly environment growth to the telecom

sector. It is one of the sources pf huge funds to meet fast network expansion. During the year 2007-08, total FDI equity inflow was Rs. 3901 crores in India. FDI in Indian telecom sector has a bright future ahead. It is the third largest recipient of FDI after financial and non-financial services and computer hardware and software, which attract 20.43% and 15.21% respectively. 5.2] Effects of FDI in Indian Telecom: Telecom service at subsidized prices. FDI inflows will allow multiple benefits such as technology transfer, market access and organizational skills. In India where 70% of population still resides in rural areas, there is a dire need of infrastructure in telecom, which FDI can provide. Foreign currency flowing in the country. Harmonious relationship with country from which foreign investment is being made. There will be increase in competition with local players, which will benefit consumers. It will have a multiplier effect. Telecommunication facility at reasonable price, affordable to many More technological inflow, will improve voice & data quality. Free flow of capital is good for Indian consumers. Foreign direct investment in telecom has been hiked up from 49% to 74%. This move is positive for the sector, as it requires investments of Rs 700 900 million over the next 5 years. There are restrictions related to remote access, transfer of network information outside India and international transit routing of Indian traffic. It has been decided to enhance the FDI in telecom services in areas like basic telecom, cellular unified access services, intranet, long distance vast, public mobile, radio service etc. FII (Foreign Institutional Investors) holding in Rcom is reduced in last one year. In March-2007, FII holding in Rcom was around 13% which has gone down to 10% in March-2008 which is around 25% reduction. In Idea, FII holding has increased. In December-2007, Ideas FII holding was around 6.6% which has gone up to 7.7% in March-2008.
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