India may net $8 bn FDI

Going by the present trend of foreign direct investment (FDI), India could well end the current financial year with FDI inflows of around $8 billion, a top government official said today.

This would surpass the estimates made by the UNCTAD which has projected FDI inflows of around $6 billion for India during the calender year 2004.

As per the latest information available with the Industry Ministry, the FDI inflows during the period April-December 2004-05 has touched $3.07 billion, a 57 per cent increase over the level of $1.92 billion during the same period a year ago.

"If one were to make estimations based on the present trend, the FDI inflows would be around $5 billion. If one adds to this the data that is directly collated by the Reserve bank of India which mainly includes reinvested earnings and accounts for 80 per cent of the total inflows, then the overall FDI inflows would be around $8 billion by the end of the current fiscal," the official said.

According to officials, even though countries like Mauritius, United States, Netherlands, Germany and Japan continue to be the top five countries for FDI inflows into India, the share of Mauritius is on the decline.

As per data of the ministry, Mauritius has been the main investor into India since 1991 accounting for around 34-36 per cent of the total inflows.

Officials said that a reason for the declining share of investment from Mauritius was the fact that most investors were coming to India directly.

"Also since the government has put several investments on the automatic route it is more attractive for investors to invest directly," an official said.

According to UNCTAD, FDI flows during 2004 to Asia and the Pacific reached $166 billion, a 55 per cent increase over 2003. Improved economic performance, a more favourable policy environment, higher corporate profitability and a rise in M&A activities in the region are key factors behind this performance.

China, India, Republic of Korea, Hong Kong, and Singapore all saw higher inflows. However, flows to the region remain unevenly distributed, dominated by a few countries. All subregions enjoyed an increase in flows as compared to the previous year.

North-East Asia - particularly China and Republic of Korea - still accounts for the lion´s share, followed by the ASEAN countries and South Asia.

Flows to Central and West Asia expanded as a result of higher oil investment, while flows to the Pacific subregion increased marginally, UNCTAD said.