Business

New highs in FDI inflow likely this year, in FY19

Rising tide: Foreign direct investment in FY18 is likely to be
about $70 billion, says Deepak Bagla of Invest India.

Rising tide: Foreign direct investment in FY18 is likely to be about $70 billion, says Deepak Bagla of Invest India.  

‘However, Centre needs to address reporting problems’

With government data showing that Foreign Direct Investment (FDI) worth $33.75 billion has already flowed into India in the first half of this fiscal, the country is poised to see FDI inflows in 2017-18 surpassing even the record $60 billion it received in the last financial year.

However, researchers have found ‘severe’ delays as well as ‘serious’ omissions and commissions in FDI reporting, and that these “problems were quite pronounced in the record-breaking year of 2016-17.”

Meanwhile, consultants said the government would need to consider the enormous foreign investor interest in sectors such as Multi-Brand Retail Trade (MBRT), insurance and pension and look at ways to further open up these sectors. It also needs to tweak policies in segments such as pharmaceuticals, spend more money on improving infrastructure as well as addressing red-tape if it wanted India to attract even more FDI in the coming years.

‘Only 2% of global flows’

Incidentally, according to CARE Ratings, “India fetched (a) mere 2% of the total world FDI inflows in 2016.” It said India’s share was “very low compared with the other peers”, adding that “Hong Kong had a share of 5%, ...while Brazil witnessed inflows of 4% of the world’s net FDI inflows.”

A study initiated by the Institute for Studies in Industrial Development and conducted by Prof. K.S. Chalapati Rao and Prof. Biswajit Dhar, which analysed the reported inflows after September 2014, showed that “due to prevailing reporting practices and some deep flaws, the available aggregates are extremely unsuitable for drawing straightforward conclusions.”

It said, “At another level, there is not much of a correspondence between the FDI policy changes, selection of thrust sectors under Make in India and the reported inflows,” adding that “incidentally, the problems were quite pronounced in the record-breaking year of 2016-17.” The report further said, “besides [the government’s] ‘Ease of Doing Business’ [initiatives], there should be emphasis on ‘Ease of Doing Policy Relevant Analysis’ also.”

However, the NDA government made a comparison of FDI from the time it took over till now (2014-17) as against 2011-14 (during the UPA regime), and recently informed Parliament that FDI grew in aviation and mining (both, six times), automobile and auto-components (1.7 times), gems and jewellery (3.5 times), electronics and IT (4.4 times), information and broadcasting (1.9 times), sea transport and ports (6.8 times), as well as textiles and apparel (2.2 times).

Meanwhile, Deepak Bagla, MD and CEO, Invest India (the government’s investment promotion and facilitation agency), said the agency currently has $80.5 bilion worth of FDI proposals under “active facilitation,” adding that FDI in FY18 is likely to be about $70 billion. In the next fiscal, significant levels of investments are expected from countries including the U.S., South Korea, Taiwan, Italy, Germany and the U.K. in sectors including food processing, railways, defence, infrastructure, automobiles and ‘Electronic System Design and Manufacturing’.

India could attract more FDI by further opening up sectors including insurance, pension, MBRT (retail trade in products manufactured in India) and pharma (liberal policy on over-the-counter medicines to boost local manufacturing capacity), besides addressing red tape and logistical problems, according to Akash Gupt, partner and national leader (regulatory services and tax markets), PwC India.

Why you should pay for quality journalism - Click to know more

The word "improving" in paragraph three was mis-spelt

Recommended for you
This article is closed for comments.
Please Email the Editor

Printable version | Feb 18, 2020 12:45:24 PM | https://www.thehindu.com/business/new-highs-in-fdi-inflow-likely-this-year-in-fy19/article22327881.ece

Next Story