Indias prominent trading partners continue to be its top investors. Leading the pack is the US, which is miles ahead of the rest, accounting for nearly 40 per cent of foreign investments in the country with commitments worth Rs 2,34,650.54 million since 1991. UK follows at a distance with approvals worth Rs 50,999.04 million.
This pattern is an old one. Both countries held the top two slots even in the pre-policy period of 1981-1990 when they accounted for 32.60 per cent of investments. Both have now increased their combined share to 37.76 per cent.
Apart from this, the only other heartening news is the entry of investments from newly-industrialised countries such as Malaysia, Singapore and Hong Kong. The spurt in investments from these regions began in 1995 with Singapore accounting for Rs 12,888.99 million while Malaysian investment commitments are Rs 15,351.36 million and approvals from Hong Kong are worth Rs 9,598.78 million (see chart in our data section Vital Statistics on page 3).
Changes in global trade policy, however, mean that Indias FDI attracting strategy has to change too. Explains Sumitra Chishti of the School of International Studies, Jawaharlal Nehru University: We cannot give special incentives to any particular country under the Uruguay agreement. So investments will solely depend on the plans of transnational companies and their preferences.
The bad news is that India doesnt really figure prominently on MNCs preference lists. A recent survey conducted by the Far Eastern Economic Review indicated that the chances of India becoming an ideal location to set up headquarters for MNCs regional operations are remote. Mumbai was only the seventh choice for respondents with Singapore ranking first followed by Hong Kong, Kualalumpur, Manila, Bangkok and Sydney.
For India in the first flush of reform, however, this may not be a major negative yet since most of the major investors are putting their money in heavy industry rather than the service industry.
The US, for instance, dominates investments in fuels, electrical equipment, machine tools, agricultural machinery, industrial equipment, chemicals, food processing and consultancy services.
After the US, it is the EU that is investing heavily in the country. Germany tops investments in metallurgical industries, boilers and steam generation, industrial machinery, earth moving machinery and dye-stuff.
Although the US continues to be a top ranker in terms of investment approvals, the picture changes when it comes to actual inflows. In a recent presentation to the Associated Chambers of Commerce, A J L Smith, Charge daffairs, European Commission in India, said the EU had overtaken the US in terms of actual inflows into India in 1994 and 1995.
Actual inflows from the EU for the past two years was Rs 539.95 million compared with Rs 309.12 million from the US.
The EU accounted for around 16.85 per cent of the actual inflows into the country in the last two years. In comparison, inflows from the US was 14.85 per cent and from Japan 4.95 per cent of total inflows.
Among the investors from the EU is the Commonwealth Development Corporation (CDC). CDC set up shop in Delhi in 1988 and has invested 150 million in more than 30 private sector companies.
These investments have been made in industries ranging from truck tyres to towels, food processing to software and finance. CDC has picked up stakes in 23 companies. Among these companies are Modi Mirrlees Blackstone Ltd, Square D Software Ltd, C G Glass Ltd and Alliance Credit and Investments Ltd.
Says Seema Ram, manager, India: CDC is now focusing on the infrastructure sector and will be looking specifically at ports and bridges.
Its first investment in the power sector has been in the Calcutta Electricity Supply Companys 500 MW coal-based thermal generating station with a commitment of 25 million.
Growth opportunities in the country have prompted CDC to form a venture capital fund, Nandi Investments Ltd for startups and expansion of small and medium-sized businesses, where it will be making equity investments in the range of $ 0.5 million to $ 5 million
Not all EU countries, however, have increased their investments in the country after liberalisation. Investments from Germany and France are on the decline. Germany had a share of 18 per cent of investments between 1981 and 1990. After 1991 it has decreased sharply to 3.22 per cent.
The other decline over the past few years has been in Japanese investments. Between 1981 and 1990 the Japanese accounted for 8.5 per cent of total foreign approvals. Between 1991 and 1994, Japans share dropped to 5.04 per cent. Japan, however, continues to be among the major investors with approvals worth more than Rs 36,390.27. million. The actual inflows from Japan came down from Rs 84.94 million in 1994 to Rs 68.14 million in 1995.
Why this fall? Japanese investors are much more finicky, reasons Chishti. Apart from the fact that the Japanese are conservative in their approach, the ground realities are not conducive to luring them to invest in the country.
Take the case of investments in the proposed Rs 2,000-crore Industrial Model Township at Manesar in Haryana. Promoted by a consortium of three Japanese companies
