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Foreign Direct Investments

Last Updated: September 2009

Improving global sentiment and a growing conducive environment in India are increasingly facilitating foreign
investors’ role in the country currently. Several other factors being attributed to the revival in foreign direct
investments (FDI) in the country include liberal investment policies and reforms, innovative and technologically
advanced products being manufactured in India and low cost and effective solutions.
India has been ranked at the third place in global foreign direct investments this year, following the economic
meltdown, and will continue to remain among the top five attractive destinations for international investors during the
next two years, according to United Nations Conference on Trade and Development (UNCTAD) in a new report on
world investment prospects titled, ‘World Investment Prospects Survey 2009-2011’.
Foreign direct investment (FDI) inflow to India was US$ 3.5 billion in July, 56 per cent higher than US$ 2.25 billion in
the same month a year ago, according to the Commerce and Industry Minister, Mr Anand Sharma. FDI equity inflows
amounting to US$ 10.532 billion were received during April-July 2009.
India's FDI inflows touched about US$ 7.016 billion in the April-June period this fiscal. The country has attracted
foreign direct investment (FDI) worth US$ 2.58 billion in June 2009, an eight per cent increase over the same month
last year as against the FDI inflow of US$ 2.39 billion in June 2008, according to the Department of Industrial Policy
and Promotion (DIPP). The FDI inflow in May 2009 was US$ 2.1 billion.
While the services sector comprising financial and non-financial services attracted US$ 1,855 million in April- June
period of the current fiscal, computer software and hardware sector garnered about US$ 239 million in the said
period.
In 2009-10, during the April-June period, Mauritius has led the investors into India with US$ 3,369 million worth FDI,
followed by the US with US$ 813 million and Singapore, US$ 372 million.
The Government on September 8, 2009, approved nine FDI proposals amounting to about US$ 15.39 million,
including High Mark Credit Information Services, whose FDI proposal is worth US$ 4.74 million. The FIPB has also
cleared a proposal by Ramboll Singapore involving an FDI of US$ 4.54 million, to set up a wholly-owned subsidiary to
provide engineering consultancy services in the field of oil and gas.
Other proposals that have been cleared are UK’s Ramboll Whitbybird Holdings, Amann Sewing & Embroidery
Threads, Rescal S.A.S France, Housing Development Finance Corp, and Marconi Telecommunications. Six
applicants, including the US$ 24.67 million-FDI proposal of Network18 Media & Investments, have been advised to
access automatic route.
Earlier, the government had cleared 10 foreign direct investment (FDI) proposals which will bring in US$ 229.67
million. The largest FDI of US$ 153.31 million will be brought in by Essel Group-promoted DTH service provider, Dish
TV India through issue of foreign currency convertible bonds in collaboration with foreign investors such as Afro-
Asian Satellite Communication Ltd, Delgrada Ltd and Lazarus Investment Ltd.
A trade facilitation body UK-India Business Council (UKIBC) survey has ranked Pune as the most suitable place for
British investments in India. The survey report, titled ‘Opportunities for UK Plc in Emerging Cities in India’, also rated
eight other cities—Ahmedabad, Chandigarh, Jaipur, Goa, Indore, Kochi, Nagpur and Vadodara—as the most
conducive destinations for UK investments in India.
The Indian retail market, which is the fifth largest retail destination globally, has been ranked the most attractive
emerging market for investment in the retail sector by A T Kearney's annual Global Retail Development Index
(GRDI), in 2009. A recent Ernst & Young study predicts Mumbai and Bangalore to be the next global centres of
investment along with Shanghai.
Policy Initiatives
To bolster higher overseas investment into cash-strapped micro and small enterprises (MSEs), the government has
liberalised the FDI norms for the sector replacing the current 24 per cent ceiling on foreign holding with the sectoral
caps. These industries will now be guided like other large enterprises as far as FDI is concerned.
Investment Scenario
The Prime Minister, Dr Manmohan Singh, while inaugurating the crude flow from the Rajasthan oil fields of Cairn
India-ONGC in Barmer, said, "Cairn's efforts show that there is a good climate for bringing foreign investment into
India and I invite entrepreneurs to invest in India."
• The Cairn-ONGC consortium has US$ 2 billion-investment and plans to invest a further US$ 1.8 billion by
2011.
• German luxury car manufacturer, Audi, is eyeing higher sales this year than its earlier target of 1,500 units
and as part of its US$ 42.83 million investment in India, the company will set up a new assembly line at its
Aurangabad plant to assemble the Q5 model from 2010.
• Italian carmaker, Fiat, will source more than US$ 1 billion worth components for its global businesses in
2010 from India.
• Accor Hospitality has said it will invest US$ 130 million to come up with 50 hotels in India by 2012.
• HealthHiway, an initiative by the Apollo Hospitals Group providing software solutions for the healthcare
sector, has received an investment of US$ 4 million from Silicon Valley-based venture capital firm, Greylock
Partners.
• Japanese tyre manufacturer, Bridgestone, which has a plant at Pithampur, near Indore, will set up a second
facility near Pune at an investment of about US$ 420.72 million.
• The German carmaker, Volkswagen, has decided to invest US$ 453.66 million more towards expansion at
its Chakan plant.
• South Korean steel giant, Posco, plans to set up a galvanising plant at an investment of US$ 907.32 million
in Raigad district of Maharashtra.
• Clinton Climate Initiative (CCI), a programme of US-based William J Clinton Foundation, has signed a
memorandum of understanding (MoU) with the Gujarat government for setting up solar parks in Gujarat and
the proposed 3,000 mega watt (MW) solar power project will see an investment of over US$ 10.28 billion.
• PepsiCo is doubling its investment in its Indian beverage business for calendar 2009 to over US$ 220 million
to increase the capacity of the business.
• Robert Bosch Engineering and Business Solutions Ltd (RBEI), the engineering and IT services subsidiary of
Bosch in India, said it would invest an initial US$ 34.89 million in a new centre in Coimbatore, which would
be developed in three phases.
• Mexican cinema chain, Cinépolis, will invest around US$ 163.1 million in south India for setting up
multiplexes across the four states. The company has lined up US$ 346.57 million for its proposed expansion
plan in the country.
The Road Ahead
With the government planning more liberalisation measures across a broad range of sectors and continued investor
interest, the inflow of FDI into India is likely to further accelerate.
Exchange rate used:
1 USD = 47.95 INR (as on July 2009)
1 USD = 48.52 INR (as on September 2009)