Service sector corners 24% of total FDI inflows in ’08

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There is good news for India Inc. Despite the global financial crisis, inflow of foreign
capital to the country has increased sharply in 2008. The aggregate inflow of foreign
direct investment (FDI) has more than doubled in 2008 over 2007. The stake was
enormous. For, Corporate India’s dependence on foreign funds has increased
steadily in recent years as the easing of norms for FDI, especially, external
commercial borrowings (ECB), over the years had led to a dramatic rise in the
inflow of foreign capital in India.

Granted, there are reasons for caution as these data relate to 2008 only and the
situation may have changed in 2009. After all, the crisis is not over yet. In fact, RBI’s
recent release shows that the inflow of ECB and foreign currency convertible bonds
(FCCBs) has slowed down considerably in 2009 — down 73% from $1,702 million in
November 2008 to $453 million in February 2009.

The decline in ECB is feared to affect the investment plans of companies. After all, a
large number of companies use these funds to import capital goods . In fact, of the
32 companies which raised funds through ECB and FCCBs last February through
the automated route, as many as 15 did so for import of capital goods for expansion
of capacity or for modernisation of plants.

That India’s investment activities in recent years have largely been financed by
foreign sources may be seen in the sharp rise in FDI inflows. Aggregate inflow of
FDI has increased more than nine times during the past five years, from Rs 14,781
crore in 2004 to Rs 1,39,725 crore in 2008.
While improved macro fundamentals in recent years have strengthened the
confidence of foreign investors in Indian industry, opening up of new areas and
changes in government policy towards FDI must have engineered this jump in
foreign capital inflow. That opening up of new areas has given foreign investors
more investment options is reflected in the changing destinations of foreign capital.
The service sector, which was a restricted domain for foreign capital in the past, for
example, has become the most sought-after area of late.

The service sector has been the prime mover of India’s gross domestic product in
recent years and foreign investors never had doubts about its potential. However,
policy restrictions in the past did not allow them to invest in this industry as much
as they willed. Now that restrictions have been eased, FDI has flowed in to this
industry as never before.

It accounted for a huge 24.3% of the total FDI inflow in 2008. In actual terms, the
FDI inflow to this sector has grown 32 times in the past five years from a mere Rs
1,074 crore in 2004 to Rs 33,947 crore in 2008.
The second most important destination of FDI in 2008 was telecommunication. It
accounted for about 8.3% of the total FDI flowing into the country in 2007.

But while the service sector and the telecommunication industry have increased
their share in total FDI inflows in the country in 2008, the software industry has
gone down the ladder further. The poor performance of the software companies
dampened the mood of the foreign investors and FDI inflow to software sector has
fallen sharply.

The sector received only Rs 7,810 crore FDI in 2008 against Rs 10,214 crore in 2007.
Its share in total FDI inflow has fallen to only 5.6% in 2008 against 16% in 2007.
But as the financial crisis continues, the big question is: Will FDI inflow to India
grow at the same rate in the coming months?

After all, the service sector, which has been the main contributor to GDP growth,
was the biggest gainer of the rise in FDI inflow in recent years. Now if the FDI
inflow slows down, it will affect the growth of the service sector and in turn, the
GDP growth.
economictimes.indiatimes.com/.../Service-sector...FDI-inflows.../4363565.cms

Sectorwise Analysis of FDI Inflow in India

Abstract:
The Sectorwise Analysis of FDI Inflow in India reveals that maximum FDI has
 taken place in the service sector including the telecommunication, information
technology, travel and many others. The service sector is followed by the
manufacturing sector in terms of FDI. High volumes of FDI take place in
electronics and hardware, automobiles, pharmaceuticals, cement, metallurgical
and other manufacturing industries.
Sectorwise Analysis of FDI Inflow in India-Glimpses
The IT industry is one of the booming sectors in India. At present India is the
leading country pertaining to the IT industry in the Asia -Pacific region. With
more international companies entering the industry, the Foreign Direct
Investments (FDI) has been phenomenon over the year. The rapid development
of the telecommunication sector was due to the FDI inflows in form of
international players entering the market and transfer of advanced technologies.
The telecom industry is one of the fastest growing industries in India. With a
growth rate of 45%, Indian telecom industry has the highest growth rate in the
world.

The FDI in Automobile Industry has experienced huge growth in the past few
years. The increase in the demand for cars and other vehicles is powered by the
increase in the levels of disposable income in India. The options have increased
with quality products from foreign car manufacturers. The introduction of tailor
made finance schemes, easy repayment schemes has also helped the growth of
the automobile sector. For the past few years the Indian Pharmaceutical
Industry is performing very well. The varied functions such as contract research
and manufacturing, clinical research, research and development pertaining to
vaccines are the strengths of the Pharma Industry in India. Multinational
pharmaceutical corporations outsource these activities and help the growth of the
sector. The Indian Pharmaceutical Industry has been experiencing a vast inflow
of FDI.

The FDI inflow in the Cement Industry in India has increased with some of the
Indian cement giants merging with major cement manufacturers in the world
such Holcim, Heidelberg, Italcementi, Lafarge, etc. The FDI in Semiconductor
sector in India were crucial for the development of the IT and the ITES sector in
India. Electronic hardware is the major component of several industries such as
information technology, telecommunication, automobiles, electronic appliances
and special medical equipments.
http://business.mapsofindia.com/fdi-india/sectors/

FDI inflows plunge by 60% in Aug

New Delhi, October 22, PTI :

Foreign direct investment in August dipped by about 60 per cent to $1.33 billion, the
lowest in this fiscal, data released on Friday showed.

The FDI inflows in August 2009 were $3.26 billion.During the first five months of
2010-11, the inflows declined by 35 per cent to $8.88 billion compared to $13.76
billion in the same period last year, the official said.

The overseas investment in June was at $1.38 billion, while that in July was $1.78
billion. The FDI in the first two months of this fiscal, April and May was $2.17
billion and $2.21 billion respectively.

FDI inflows down by about 60% in August

New Delhi, Oct 13, (PTI):

Reflecting fragile recovery in world’s major economies, foreign direct investment into
India dipped for the third consecutive month, by about 60 per cent to $1.33 billion in
August.

The FDI inflows in August 2009 were $3.26 billion. Contrary to smart recovery in the
domestic economy and a rebound in exports, overseas investment show a slackening
trend in the current fiscal, an official told PTI. For the April-August period of 2010-11,
FDI inflows declined by 35 per cent to $8.92 billion compared to $13.8 billion in the
same period last year, the official said.

According to experts, weak global economic recovery is one of the reasons for declining
FDI in India. “The main reason for the decline in FDI is slump in the major western
economies like the US and Europe...,” international trade expert with India’s prestigious
Indian Institute of Foreign Trade (IIFT) Rakesh Mohan Joshi said. Crisil chief economist
DK Joshi said: “This is not a good news for Indian economy. This reflects that global
economic recovery is still fragile and some impact of that would be reflected in our FDI.”

Foreign investment in July 2010 was at $1.78 billion, a dip of 49 per cent and in June
international inflows were at $1.38, a dip of 46 per cent over the year ago period. The
sectors which attracted foreign investment, included services, telecommunication,
construction activities and computer software and hardware, the official said. The country
received maximum investment from countries like Mauritius, the US, the UK, Singapore,
the Netherlands and Japan.

The government has recently floated discussion papers for public comments to liberalise
FDI in multi-brand retail and defence sector. The foreign investment remained low-key
despite a recent United Nations Conference on Trade and Development (UNCTAD)
survey showing that India would remain the second most important FDI destination for
transnational corporations during 2010-2012, next only to China.

In its latest ‘World Investment Prospects Survey 2010-2012’, the UNCTAD said
transnational corporations remain buoyant about investment prospects in China, India and
Brazil. FDI for 2009-10 at $25.88 billion was lower by five per cent from $27.33 billion
in the previous fiscal.
FDI in service sector dips by 28.19%
New Delhi, Aug 18, (PTI):

The Centre, on Wednesday, said foreign direct investment (FDI) inflows in services
sector in 2009-10 dipped by 28.19 per cent to $4.39 billion.

The sector had attracted FDI worth $6.11 billion 2008-09. However, inflows in the sector,
including financial and non-financial services were highest in comparison to other segments,
Minister of State for Commerce & Industry Jyotiraditya Scindia said in a written reply. Of the
$4.39 billion FDI, about $1.99 billion came from Singapore.

http://www.deccanherald.com/content/106676/fdi-inflows-plunge-60-aug.html