India crosses FDI milestone of $100 bn

India crosses FDI milestone of $100 bn

New Delhi: India has crossed the $100 billion milestone in foreign direct investment through equity since 2000 up to July this year testifying the country’s increasing profile as a safe and sound investment destination in the midst of the global financial crisis.

As much as 44% of the money came through the Mauritius route, apparently because the investors wanted to take advantage of India’s double taxation avoidance treaty with the island nation.

The cumulative FDI inflows since 2000 and up to July 2009 amounted to $100.33 billion. The inflows in the first four months of the current financial year was $10.49 billion, according to data compiled by the Department of Industrial Policy and Promotion.

The other big investors included Singapore, the US, UK and the Netherlands.

Commenting on the $100 billion milestone, economists said India is being perceived as a safe and dynamic destination for global investors.

“This is a reflection that India is being taken as a safe and dynamic destination for investment as the economy is growing at 6 per cent. The investors also want to diversify their portfolio from China by investing here," Rajiv Kumar, CEO and director of economic think-tank ICRIER said.

The FDI would further improve if the economic recovery continues.

“We did not receive much FDI initially...since 2008 we have started receiving good numbers...there are signs of economic recovery in a few countries and I think inflows will improve with the economic recovery,“ CRISIL principal economist D.K. Joshi said.

Ficci secretary general Amit Mitra said FDI not only brings money but also new technology and managerial capabilities.

“FDI’s main impact comes from new technology, new managerial capabilities, new benchmarks in corporate functioning," Mitra said.

India reached the $100 billion mark at a time when the global financial crisis has had a dampening impact on FDI flows which are expected to fall this year.

According to the World Investment Report, 2009, of the UN body UNCTAD, global FDI flows will shrink by 30% in 2009 and recover only marginally during the next year.

The report found the pattern of FDI flows had been varied. The inflows of developed countries plunged in 2008 by 29%, in contrast the developing and transition economies saw inflows rise of 37% in 2008.

“Although declining (as compared to previous years) FDI flows to developing countries have proved to be more resilient than other capital flows such as portfolio investment and bank lending. The main reasons for this is that FDI is more of a long term nature than capital flows," the report said.

India’s services sector topped the table, receiving 23% of the cumulative equity FDI inflows followed by computer software, hardware, telecommunication and real estate.