Growth streak continues

Second time in succession, FDI inflows into India registered upward growth on Y-o-Y basis. In November 2009, FDI inflows posted a vigorous Y-o- Y rise of 60 per cent with $1.7 billion against $1.08 billion in the corresponding month of 2008. In October 2009 FDI inflows had risen by a whopping 56 per cent on Y-o-Y basis.

During April-November 2009, India attracted FDI inflows of $19.379 billion (approx Rs 93,354 crore), as against $19.791 (approx Rs 85,700 crore) received a year ago, as per the data released by the Department of Industrial Policy and Promotion (DIPP).

Mauritius remained a major source destination of FDI inflows into India and contributed $45.241 billion (approx Rs 2,01,694 crore) till November 2009. Singapore $9.3 billion (approx Rs 41,431 crore) and the USA $7.8 billion (approx Rs 35,194 crore) were the other two prominent FDI source destinations.

FDI Clearances:

On 27 January 2010, the Union Government on recommendations of the FIPB approved 14 FDI proposals amounting to Rs 732.57 crore.

The major proposal cleared was of Asset Reconstruction Company's Rs 272.86 crore FDI plan to hike the FDI level from 14.66 to 16.01 per cent. Other proposals which featured among the large proposals category were of Standard Chartered Bank and NDTV Lifestyle.

NDTV Lifestyle's Rs 251.75 crore plan seeking to add a foreign collaborator and issue fresh equity to carry out uplinking and broadcasting of non-news channels has been approved. Also, the government gave a go ahead to Standard Chartered Bank's Rs 205.95 crore proposal to increase FDI from 74.9 to 100 per cent in the company.

In all, the government rejected four and deferred 10 FDI proposals. Telstra Telecommunications, and Ascendas IT Park were among rejected proposals. Etisalat's plan for transferring shares from resident to non-resident (account) of a company engaged in the telecom sector has reportedly been deferred. Other proposals deferred were of Tikona Digital, Verizon Communications, Bharat Oman Refineries, Walt Disney Company and so on.

The Rs 2,400-crore FDI proposal of India Infrastructure Development Fund of Mauritius was recommended to the CCEA as any investment above Rs 600 crore has to be referred to the committee.

Other Developments:

The Union Ministry of Finance has rejected DIPP's proposal seeking to remove the mandatory threeyear lock-in for FDI in the real estate sector, affecting the prospects of the sector raising funds from overseas.

The ministry opines that the lock-in acted as a restriction, checking speculation and shielding the sector from sudden flight of capital in the time of crisis. The ministry's debate is that despite the correction after the global meltdown, real estate prices did not come down as much as those of some other asset classes. This was largely because the lock-in shielded the sector and prevented foreign players from exiting suddenly which could have led to a crash.

Also, the DIPP proposes to ease the norms for FDI approval. At present, projects worth more than Rs 600 crore require the final approval of the CCEA. The DIPP has proposed that this ceiling be raised to anywhere between Rs 1,000 and Rs 1,500 crore.

According to the current norms, any FDI infusion, irrespective of its size, into projects worth above Rs 600 crore, requires a formal clearance from the CCEA after it passes through FIPB under the ministry.

The new norms are likely to be notified after the introduction of a consolidated FDI policy framework on 1 April 2010. Projects below the decided limit are to get their final approval from the ministry after they have been cleared by the FIPB.