About one-fourth of FDI is reinvested earnings in 5 years: Assocham

NEW DELHI: As much as one-fourth of India's total foreign direct investment ( FDI) is reinvestment of earnings by the overseas investors in the last five years, reflecting commitment of foreign companies to India, an Assocham study has said.

The data of the last five years (till November 2012) shows that of the total FDI inflows of $ 186 billion, the reinvested earnings aggregated to $ 45 billion, Assocham said in a study.

"The trend line has been more or less the same for the last 10 years which shows that the foreign investors who have set up their operations or have acquired businesses in India are ploughing back good enough," Assocham President Rajkumar N Dhoot said.

Reinvested earnings consist of the direct investors share of earnings not distributed as dividends by subsidiaries or associates and earnings of branches not remitted to the direct investor.

The study said, in fact, 2010-11 was a good year in terms of reinvestment of earnings by foreign investors.

Of the $ 34.8 billion total FDI inflows, the reinvestment of the earnings accounted for about 34 per cent in the 2010-11 fiscal.

Further, the chamber said, there is an urgent need to attract FDI in infrastructure sector particularly in the area of construction.

"Somehow, we need to sell the infrastructure story to the international investors. We must try to attract maximum FDI into the construction industry as our country suffers a big bottleneck on this count. Building of physical infrastructure would also have a multiplier effect," Dhoot said.

This is even more relevant at this point of time when India's industrial sector, particularly manufacturing is not doing well. Exports, too, are in the negative territory, Assocham said.