New initiatives to boost inflows

NEW DELHI MARCH 29. Foreign direct investment (FDI) inflows into the country in 2001 posted a marginal decline to Rs. 19,265 crores against Rs. 19,341 crores last year, even as faster approvals improved realisation rate to 72 per cent, the highest since 1991.

While average realisation rate (FDI inflows to approval ratio) for the decade 1991-2001 in rupee terms was 39.66 per cent, that for 2001 was 71.68 per cent, the highest since 1991 as per the latest annual report of Department of Industrial Policy and Promotion for 2001-02 released today.

"While there was an overall decline of over 40 per cent in the global FDI inflows during 2001 as compared to the previous year, the inflows into India showed a positive trend,'' the report said.

Inflows of FDI from Mauritius accounted for the largest chunk of FDI inflows with 38 per cent followed by the U.S. with 7.54 per cent and Japan with 4.93 per cent.

In terms of quantum of investment, the U.K. with 18.5 per cent of the total approvals was the highest followed by the U.S. with 18.31 per cent, the Netherlands with 13.74 per cent and Mauritius with 10.76 per cent.

FDI inflows net of ADRs and GDRs and advance pending issue of shares during 2001 were around Rs. 16,000 crores which is 47 per cent higher than that received during the previous year, it said.

The telecom sector garnered a major share of approvals accounting for 34 per cent of the total Rs. 26,874 crore approvals during January to December 2001, followed by oil refineries with 22 per cent and electrical equipment including computer software with 7 per cent.

A state-wise break-up reveals that States such as Maharashtra, Delhi, Tamil Nadu, Karnataka, Gujarat, Andhra Pradesh, Madhya Pradesh, West Bengal, Orissa and Uttar Pradesh accounted for a major portion of the FDI investment approvals during the cumulative period from 1991 to 2001.

Commenting on future prospects for FDI, the report said, "large volume inflows of FDI would depend on the domestic economic conditions, the FDI policy, world economic trends and strategies of global investors.''

It said the advantages that India has as an investment destination include its strong fundamentals and a large and growing market.

While these factors are recognised by a large number of global investors, "the ongoing initiatives such as further simplification of legislation and de-licensing and setting up regulatory authorities such as Central/State electricity regulatory commissions is expected to provide necessary impetus to accommodate enlarged FDI inflows in future.''

The Government has already taken a number of measures to liberalise the FDI policy including allowing up to 100 per cent FDI in airports, courier services and development of integrated townships including housing.

Similarly, FDI up to 100 per cent in drugs and pharmaceuticals excluding those which attract compulsory Licence have been placed on the automatic route, while the FDI limit in the banking sector has been raised to 49 per cent from 40 per cent and that for defence opened to private sector participation with FDI permitted up to 26 per cent subject to licensing.

Meanwhile, an official release said a study was commissioned by the DIPP with the Centre for Monitoring Indian Economy to identify reasons for the slow progress in the implementation of investment projects.


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