BackGlobal financial turmoil to affect FDI inflows: Nath
Global financial turmoil to affect FDI inflows: Nath
PremiumU-turn: Minister of commerce and industry Kamal Nath. Harikrishna Katragadda / Mint
New Delhi: Foreign direct investment, or FDI, into the country will feel the heat of the global financial turmoil, commerce and industry minister Kamal Nath said. “Of course, we will see the impact on our FDI inflows in the next six months," Nath said at a gathering of chartered accountants.
It was only last week that the minister had expressed optimism that India would exceed its target of $35 billion in FDI this fiscal. FDI inflows reached $14.6 billion in the first five months of 2008-09.
Nath noted how the mood had reversed in the stock market since January 2008. “We saw (a) boom in our Sensex in January, when it was over 20,000 and today there is gloom," he said. The Bombay Stock Exchange’s benchmark Sensex has dipped from a high of more than 21,000 points in January to below 10,000 points on 17 October.
With foreign institutional investors, or FIIs, pulling out billions of dollars since the beginning of this calendar year, the rupee has come under intense pressure and lost more than 20% against the US unit since April.
Nath said FIIs had been pulling out of India in the last several weeks. While this did not reflects India’s fundamentals, it “shows the inter-connection".
Prime Minister Manmohan Singh, on 10 October, had also expressed his concern over the Indian currency coming under pressure.
Analysts say that if the pace of FDI inflows gets affected, the currency may weaken further. India’s foreign exchange reserves dropped by close to $10 billion for the week ended 10 October from a week prior.
“I met a Chinese delegation who told me that they are going to see a great contraction in export...because nobody (from the Western economies) is going to buy," Nath said, adding, “this is a problem not confined to borders."
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