This is the first dip in last 10 months.
Foreign direct investment (FDI) inflows to the country dipped 26 per cent in October this year to $1.49 billion, compared with $2.02 billion in the same month a year ago. Foreign equity inflows had increased by 19.5 per cent in the same month last year.
If this decrease in the pace of FDI inflows continues in November, India may miss the $35-billion FDI target for 2008-09. FDI inflows help bridge the current account deficit and slowdown in equity capital, putting further pressure on the rupee. This is the first time FDI inflows have dipped in the last 10 months.
In April-October 2008, the inflows were $16.67 billion, 80.2 per cent higher than the $9.25 billion in the same period last year.
“FDI inflows in April-September 2008 showed an increasing trend each month in comparison with the same period in the previous year,” Commerce Minister Kamal Nath today informed the Lok Sabha today.
October FDI numbers come at a time the Indian economy is facing headwinds arising out of the global financial meltdown. Foreign institutional investors have pulled out nearly $14 billion from Indian equity markets since January this year to meet their parent companies’ need for liquidity.
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Moreover, exports during the month dipped over 12 per cent, the most in five years, while industrial production dipped (by 0.4 per cent) for the first time in nearly one-and-a-half decade as Indian factories cut down production on account of waning demand from both domestic and global markets.
Nath said it would be difficult to assess the impact of the worldwide slowdown on ongoing projects in the country. Quoting studies by international agencies, he cautioned that FDI inflows to developing nations would decline.
Meanwhile, the Department of Industrial Policy and Promotion has proposed some measures for the consideration of the Union Cabinet to attract more FDI. These include scaling up of the FDI cap in single-brand retail to 100 per cent and allowing 51 per cent FDI in multi-brand retail of electronics goods, computers, sports goods and watches.