Investment trends: January 2011

The robust Indian economy has become a wave to follow on and the engagement opportunities which are being offered are becoming part of the rising economic bandwagon to prosperity. The business investments in India are a new trend which is enabling the Indian economy to prosper, while attracting the business investment opportunities in India to increase on a global level.

• India has so far (December) in 2010 registered 869 deals including mergers and acquisitions (M&A), private equity (PE) and qualified institutional placement (QIP) valued at Rs 2,54,700 crore (US$ 54.4 billion), according to a report done by Grant Thornton India.
• The Government has approved a total of 19 foreign direct investment (FDI) proposals worth US$ 958.71 million, according to a statement by the Finance Ministry. The proposals were recommended by the Foreign Investment Promotion Board (FIPB) headed by Mr Ashok Chawla, Finance Secretary in its meeting on December 31, 2010.
• The cumulative amount of FDI flows into India from April 2000 to November 2010 aggregates to US$ 186. 79 billion, according to the data released on January 19, 2011 by Department of Industrial Policy and Promotion (DIPP).
• The non-resident Indians (NRIs) among the overseas Indians accounted for US$ 4.68 billion FDI inflows during April- November 2010-11 contributing to 3.77 per cent of the total FDI inflows into the country.
• The amount of FDI equity inflows from April to November 2010-11 were registered at US$ 14.03 billion. The amount of FDI equity inflows in November 2010 alone stood at US$ 1.63 billion. According to the statement on sector-wise FDI equity inflows, the percentage share of services (including financial and non-financial) stood at 21 per cent of the total FDI inflows into the country followed by computer software and hardware sector at 8 per cent, telecommunications and housing & real estate at 8 per cent each.
• Mauritius accounts for 42 per cent of the total FDI equity inflows with cumulative investments during April to November 2010-11 adding upto US$ 5.16 billion.
• The total foreign institutional investors (FII) inflows for the calendar year 2010 stood at US$ 39.5 billion as compared to US$ 18.5 billion in 2009.
• According to the latest DIPP data released on January 19, 2011, Maharashtra and the national capital region (NCR) accounted for nearly 55 per cent of foreign direct investment (FDI) inflows into the country during the first eight months of 2010-11. Maharashtra along with Dadar and Nagar Haveli and Daman and Diu attracted the maximum FDI of about US$ 4.47 billion (Rs 20, 308 crore) during April-November, 2010-11, accounting for 35 per cent of the total FDI in the country during the period, while NCR, including parts of Uttar Pradesh and Haryana, received US$ 2.04 billion (Rs 9, 297 crore) of FDI and accounted for 20 per cent of the total FDI in the country. During the period, India attracted US$ 14.03 billion of FDI.
• Furthermore, Karnataka was the third-most preferred FDI destination in the country, attracting US$ 1.11 billion during the period, followed by Tamil Nadu and Pondicherry at US$ 674 million, Andhra Pradesh at US$ 594 million while Madhya Pradesh and Chhattisgarh accounted for US$ 406 million, as per the DIPP data.

FDI by NRIs reached its peak in 2007-08 with US$ 1.69 billion even though it dropped drastically from US$ 1.6 billion in 2008-09 to US$ 0.35 billion in 2009-10. Similarly, NRI investments as part percentage to the total FDI inflows was recorded at 6.86 per cent in 2007-08, which witnessed a sharp decline to 1.37 per cent in 2009-10 from 5.95 per cent in 2008-09 . Nevertheless, the remittance inflows to India more than doubled registering a smooth growth over a span of the last five financial years – US$ 24.95 billion in 2005-06 to US$ 53.9 billion in 2009-10. Notably, India was also declared to receive the highest remittance inflows in the world. Significantly, 20 per cent of the funds received through remittances were deposited in bank accounts while 13 per cent were invested in form of land/ property/ securities.

Policy Measures

• The final guidelines on over-the-counter (OTC) foreign exchange (Forex) derivatives and overseas hedging of commodity and freight prices were issued by the Reserve Bank of India (RBI) on December 28, 2010.
• The Government further plans to announce significant policy measures relating to allowance of FDI in the multi-brand retail segment, even as the Department of Industrial Policy and Promotion (DIPP) under the Ministry of Commerce and Industry is giving final touches to the draft report prepared by an inter-ministerial committee. Global multi-brand retail chains have also been pushing India to open up the sector for FDI in order to tap the billion-plus consumers market. International retail juggernauts such as Wal-Mart, Carrefour and METRO have opened up their cash-and-carry stores in order to tap the market.
• Wholesale cash-and-carry was thrown open for 100 per cent FDI in 1997, subject to prior approval from the government. It was brought under the automatic route in 2006. During April 2000-March 2010, US$ 1.779 billion worth of FDI were received in the sector. In 2006, the government permitted 51 per cent FDI in single-brand retailing. Since then, total FDI received till March 2010 was to the tune of US$ 194.69 million in this category.

(Source: SIA Newsletter of DIPP and Economy News)