An analysis of the official data for the last 5 years from the 2008-09 till 2012-13 (April-Nov for FY13) shows that of the total FDI of Rs 1,023,000 crore ($186 billion), the reinvested earnings aggregated Rs 24,7500 ($45 billion).
“The trendline has been more or less the same for the last 10 years, which shows that the foreign investors who have set up their operations or have acquired businesses in India are ploughing back good enough," says Rajkumar N Dhoot, President of Assocham.
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Financial year 2010-11 was the best in terms of reinvestment of earnings by foreign investors. Of the Rs 19,1400 crore ($34.8 billion) total FDI inflows, the reinvestment of the earnings accounted for a huge 34%. But this was the worst period in the 5 years between 2008-09 and 2012-13 for pure equity inflows in the total FDI. Of Rs 19,1400 crore, the equity was about Rs 117150 crore ($21.3 billion).
A sectoral analysis throws the services sector attracting the maximum FDI inflows accounting for about one-fifth of the total foreign investment. “This is not surprising, given the fact the services account for over 55% of the Indian economy,” Assocham study noted.
Construction development, including building of infrastructure, housing and township accounted for about 12% of the total overseas inflows, followed by telecommunication and computer software and hardware, added Dhoot. “We need to sell the infrastructure story to the international investors. We must try to attract the maximum FDI into the construction and infrastructure as our country suffers a big bottleneck on this count. Building of physical infrastructure would also lead a multiplier impact," he said.
This is even more relevant at this point of time when India’s industrial sector, particularly manufacturing is not doing well. Exports too are down into the negative territory. Boost to investment into the construction sector, particularly infrastructure would be a catalyst for the overall GDP expansion, Assocham said.
The fiscal year 2006-07 was indeed a turning point for FDI. In this year, the total FDI crossed the double digit figure and the equity components alone showed an increase of about 300%.
The trendline has been more or less stable in the last six – seven years, the study noted. It also found that the mergers and acquisitions, including the big-tickets ones also contributed to increase in the FDI into the country.