Explore new markets to push up FDI

INVESTMENT COMMISSION RECOMMENDATIONS

The Investment Commission has recommended a two-pronged strategy to increase foreign direct investment inflow into India.

This includes increasing visibility in countries like France, Spain, Canada and Taiwan which have little investment in India, while also increasing FDI inflow from countries like the US, the UK, the Netherlands and Japan.

The commission believes investments from these countries will grow through small and medium enterprises.

The commission has noted that the US, which is the largest investor in India, ranks only fourth in China.

"In absolute terms, investments in China by the US are 14 times more than in India. Similarly, investments from the UK to China were 4.7 times more, Netherlands 3.7 times, Japan 82 times, France 17.8 times and South Korea 204 times," it said.

While China attracted an FDI of $53.3 billion in 2003, India attracted just $4.3 billion.

"Overall, China received 36.6 times more FDI than India in 2003," the report adds.

A comparison of key source countries of FDI for India and China shows that China gets a large proportion of its FDI from Asian countries such as Japan, South Korea and Taiwan while India's FDI is predominantly from the western hemisphere with the US, the UK, Germany and the Netherlands accounting for the largest inflow in recent years.

A sector-wise comparison between India and China reveals that China gets a large part of its FDI in telecommunication and computer equipment,real estate, property development, chemicals, leasing and business services.

In contrast, India gets most of its FDI in services, electronics, electrical equipment, energy and computers. Internationally, finance, trade, mining and business activities are major sectors into which FDI flows.

However, these are the very areas in India in which FDI is lacking due to policy restrictions. Changes in policy and procedures in these areas can have a major impact.