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Monday, 10 Jun 2013
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FDI Inflows second lowest in the last six financial years

FDI Trend Chart_ProjectsToday

 

FDI inflows into India contracted by 38 per cent to $22.42 billion in 2012-13 compared with $35.12 billion of FDI inflows the country witnessed in 2011-12, as per the data released by the Department of Industrial Policy & Promotion (DIPP).

 

The top six sectors which received large FDI inflows during 2013-14 were: Services ($4.83 billion), Hotel and Tourism ($3.25 billion), Automobiles ($1.53 billion), Metallurgical ($1.46 billion), Construction ($1.33 billion) and Pharmaceuticals ($1.12 billion).

 

  FDI inflows in FY13
Sector
$billion
Services
4.83 
Hotel & Tourism
3.26 
Automobile
1.54 
Metallurgical
1.47 
Construction
1.33 
Drugs & Pharma
1.12 
Power
0.54 
Computer Software & Hardware
0.49 
Telecommunications
0.30 
Chemicals (Other Than Fertilizers)
0.29 

Mauritius remains the largest source country in terms of value of FDI inflows into India. In all, India received FDI worth $9.49 billion from Mauritius. The country was followed by the UK ($7.87 billion), Singapore ($5.25 billion), Japan ($2.97 billion) and the US ($1.11 billion).

 

In the last few months, the government unveiled major FDI reforms and also consolidated the FDI policy into a single document. Those reforms have failed to spur the quantum of FDI inflows.

 

The FDI policy changes effected by the Indian government in September 2012 allowed 51 per cent FDI in multi-brand retail. The policy reforms though enthused the foreign multi-brand retail chains, the ambiguity in the FDI policy and also to the mandatory conditions laid out for foreign investors have made the foreign companies to adopt a wait and watch policy before announcing big investment plans.

 

The policy states that foreign retailers who want to set up retail stores in India have to mandatorily invest at least 50 per cent of the total FDI inflows brought in 'backend infrastructure' within three years of the first tranche of FDI wherein backend infrastructure includes capital expenditure on agriculture market produce infrastructure and others.

 

Foreign retailers also have to adhere to minimum sourcing requirement of 30 per cent from domestic small and medium enterprises. Moreover, any entity with FDI can only set up shop only in those states that have allowed FDI in retail.

 

So far only 11 states/union territories have allowed FDI in multi-brand retail. They are Andhra Pradesh, Assam, Delhi, Haryana, Jammu & Kashmir, Maharashtra, Manipur, Rajasthan, Uttarakhand, Daman & Diu and Dadra and Nagar Haveli.

 

The Central Government also hiked FDI in single brand retail from 51 per cent to 100 per cent. IKEA's proposal, which will bring in $1.9 billion over the next 10-15 years through single brand retail, was recently approved by Cabinet Committee on Economic Affairs.

 

FDI policy reforms also allowed foreign airlines to pick up 49 per cent stake in domestic airlines. Following which the Jet-Etihad deal was struck. AirAsia's proposal to form a budget airline in a JV with the Tata Group and Telstra Tradeplace has also been cleared by the Central Government.

 

If India wants to increase the FDI inflows in the coming years, the central government should clear the ambiguities that confuse the foreign investors and create an investment friendly environment.

 

Manufacturing Sector Developments

 

 
  • Reliance Industries will invest Rs 1.5 lakh crore over the next three years in exploration and production of oil and gas, petroleum refining and marketing, petrochemicals, retail and 4G broadband networks
  • The Punjab Government unveiled its new industrial policy with cabinet approval to facilitate investment in the state
  • Laurus Labs is planning to invest Rs 200 crore to set up two new manufacturing facilities in addition to the existing one near Visakhapatnam
  • Essar Oil intends to invest Rs 35,000 crore to increase the capacity of its Vadinar refinery in Jamnagar district of Gujarat
  • JK Lakshmi Cement will invest Rs 2,100 crore in an expansion plan

 

Infrastructure Sector Developments

 

 
  • Godrej Properties (GPL) has unveiled Phase-V of its residential project in Kolkata - Godrej Prakriti, spread over 22 acre
  • Pimpri Chinchwad New Town Development Authority (PCNTDA) has invited bids for the construction of flyovers at Pune, Maharashtra
  • The Maharashtra state government has given approval to the modernization plan for the Chhatrapati Shivaji International Airport (CSIA) in Mumbai
  • Directorate of Medical Education, Madhya Pradesh, has invited EoIs to undertake development of the medical college and other related facilities through PPP route
  • The Union Cabinet approved the Real Estate Bill, which intends to organise and monitor the sector

 

Power Sector Developments

 

 
  • Lanco Infratech's EPC division has bagged an order for Lignite based Power Project at Surat,Gujarat
  • Jindal Power (JPL) and IL&FS Energy Development Company, have individually shown interest in partnering NMDC in its thermal power plant in Uttar Pradesh
  • The Orissa Government has imposed new conditions on Jindal Synfuels, a subsidiary of Jindal Steel & Power (JSPL), for its proposed coal-to-liquid (CTL) project
  • Jakson Power Solutions will invest around Rs 750 crore in its solar segment in the next three to four years

 

Quote of the week:

 

Anand Sharma_ProjectsToday

"I admit that last year was a difficult year. It was because of perception, which was based on some misgivings. But now I see renewed interest (in FDI), I see a hope that 2013 will be a better year."

Anand Sharma,
Minister of Commerce and Industry

 

 
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